20 Episode results for "vantaa"

SaaStr 438: Webflow CEO Vlad Magdalin on Building an Enduring Company, One Hard Lesson at a Time

The Official SaaStr Podcast

27:46 min | 4 months ago

SaaStr 438: Webflow CEO Vlad Magdalin on Building an Enduring Company, One Hard Lesson at a Time

"This is sastre founders favorite series where you can hear some of the best of the best from sastre speakers. This is where the cloud means is getting compliant with a sock to report. On your company's twenty twenty one roadmap vantaa automates the tedious and time consuming process of collecting evidence for an audit. So you can get focused on growing your business. On average vantage customers are sought to compliant in just two four weeks compared to three to five months without fanta learn more and redeem. Ah one thousand dollar off coupon at vantage dot com forward slash sastre. Today building an enduring company one hard lesson at a time with web flow. Ceo blad magdalene. I don't know if. I have the time to share all of the hard lessons that i've learned just a few of them that have stood out over the last seventy years that has been in business but actually what has been in business four different times with four different teams and failed three times before this time that hopefully is on a non failed trajectory and i wanted to tell a little bit of of the journey that That went through in those multiple attempts in trying to get it off the ground. That's all the way back to the more than sixteen years ago. Now in two thousand five low still in college in having the initial idea with the same exact name. Same exact products direction and it was sort of early days of web two point. Oh right after the the web. One point zero dot com a crash. That happened still pessimism. But i had all this optimism that something like workflow could exist and try to do it solo for for a long time i. It was my senior project. I tried to get a bunch of clients to to build products for them But it just could not find funding at the time. You really needed to have an entire team. There's a lot of skepticism around. Would detect investments work in only like these companies are being invested in and eventually it just have to find a real job so once i graduated i got a job into it. A very quickly Maybe six months in kind of got the itch. Start working on it again and this was the early days of. Why see this is when we win. Wicks were starting. The web was kind of having this Rebirth moment where there are a lot of new startups. A lot of being drops in In domains remember that flickers the twitter's etcetera so sort of a two friends that into it and We raised a little bit of funding But just ran into. Many problems had a trademark issue. All of us had very busy day. Jobs that that old more and more of our attention into into work and eventually just fizzled out Various co senator decided to work on the things. And i decided to focus more on work and then my wife and i moved to sacramento and and decided to have kids sort of light at that point thought that hey we missed our chance We really taking off. Chances gone but then as i had kids thousand tried to start it again but in in kind of a non Resigned not creating a big company and just creating a really small agency where i could create a small product. Solve my own problem and Do it that way. Without all the expectations of getting funding or having founders cetera. It was just too hard to to keep the energy going with two young kids With time job It was just not something that worked out over the course of time. I think i've spent like four years on it and eventually gave up. Because i just wasn't seeing any any traction and then randomly. This is like active providence. Or whatever you wanna call it in two thousand eleven in early two thousand twelve from bail number two when we had a trademark submission. I got in my house. We moved two or three times by that point. A trade certificate from our first submission that somehow the company that had the trademark had gone out of business in this had cleared q. In i just saw it as a sign that need to start it again. So in two thousand twelve i convinced my My brother was my eventual co-founder to start working part time so he was a designer. I was more of a developer and we started jamming on the side A little bit of moonlighting a little bit of working with customer with the clients build websites but also a lot of focus on building a product. So that's the. That's the irritation that i want to focus on today because like that's the one that actually took off in where i learned most of my lessons but like the takeaway there is that timing really matters even when i thought it had all the skills in early iterations either technology wasn't ready or i didn't have the the right co to keep me motivated in accountable and the sense of You know Luck or privilege. Whatever you wanna call it like this event where it got this trademark certificate Just kicked me into gear and just really important to take the right direct partners like people who had worked with people that are really trusted alec. My brother and my co-founder bryant. Who i've worked a lot with that into it and i gave myself such a hard time through those first three failures of like i miss the mark. I missed the The boat on building this kind of company because other competitors existed in didn't give myself permission to to think that actually a lot of things were kind of outside of my control And in a lot of this is to a certain degree of luck and good timing being at the right place at the right time so we ended up starting the company incorporated in a reminder to kids at the time My daughters were one in three or almost one in almost three and we have all this enthusiasm. I all the stock. That could that i had it into. It had basically my entire life savings which totaled about twenty grand with the stock sales imported all into the company. Got my wife on board. Got her convinced that you know we were going to raise a ton of funding couple. Months is kind of off to the races. My brother surgery moved into our tiny little condo where we had our kids room that we kind of like cleaned out that he Crush on the floor. We somehow had this this kind of perception that we had to do all of this stuff to run a startup like we spent half a day in park taking professional headshots. Even though we didn't have a product we didn't have a website. We'd have anybody cared about like what we rebuilding. But we just like somehow had this check list of things in our minds around like what real startups do. But in retrospect was kind of silly and then route sort of like thought that hey we have almost unlimited money. That's what it felt like at the time of twenty brand. That's in this business account and you know what do you do with that. I buy brand new macbooks. Which is exactly what we did in. Here's sort of my my wife. The voice of reason saying is that the the best idea and me rationalizing yale like you need to have the best equipment to make happen. But don't worry we're gonna do this kickstarter we're gonna raise three hundred grand and everyone's gonna love this product in is going to buy into it. Of course we pour in Something like twelve thousand dollars in into kickstarter video with to rent like this massive flat that looks like modern. We record this entire video around the idea of wet flow the product. We're going to build in. Of course it's like a plea to kickstarter users from other videos that we've seen that were successful so at this point most of our money is gone. We even had like this. The guy convinced to do a little keyboard cat impression that sergio almost made on the internet but glad we spared the world from from that happening and then reality started to hit at this point. We're almost out of money. But we still have all this optimism that we're going to post the kick starter. It's gonna go bonkers. We're gonna get all this money and we're going to build the product etcetera and on that emotional high. We decided to apply. See thinking that. Hey we have this great idea. We have this Kickstarter video that we're about to put up and in a matter of two days. We got both a rejection from my seat. Saying that you know. They're not open to interviewing as in that round in kickstarter telling us. hey actually. We don't support software Either has to be downloadable or it has something that you physically shift to people and of course our entire videos kickstarter hate kicks or like you can't just like ad-lib are mad lib indigo or something like that through through post production It was essentially a completely shot project that we had to. We had to throw away so we went into ledges deep work mode to we moved to this place called the hacker doja which completely free but also pretty you have to fight for space and had to be there like super early in the day To to get a table to to work on. And then you know we're we're kind of at the at the precipice of like nothing's working we've got rejected from my see. Kickstarter doesn't work and right at the end of the year of two thousand twelve. My daughter gets really sick and with a life threatening condition And of course when we started the company in september i have personally made the calculation that k. families healthy kids are young if something happens like oh we really need is catastrophic. Health insurance soared. Health insurance was of the variety where it's get ten fifteen thousand dollars deductible where just test alone to figure out what kind of surgery she'll need came to like twelve thousand dollars or whatever in because it's close to the end of the year before the surgery actually happens. It rolls over to january first in the deductible resets in all of a sudden we're completely out of money on borrowing money on credit cards. Things are really release. It home thankfully were able to borrow enough to pay for the surgery in. She's perfectly fine now but but things are getting so so tense. That we're we're just like scraping together money. We sold the family car that we had little bit of equity and converted to really cheap lease and then surgeon. I figured out just to survive on the company front. We found this restaurant called. Where for for eight dollars and thirty cents. You could order one fajita plate that came with to sorta like fajitas but enough raw materials to make to burritos. So that was our daily sustenance. We were just like go to this place today. Have those You know have have eight dollars and thirty. Cents meals Expense day that was keeping us going in the thing. That really brought it home. Like the the one gift. My wife gave me that christmas. Because that's how phil stinks. Felt at home. Was this placard like this thing. Where the frame twenty dollar bill that said in case of emergency break glass in in we were such like hanging on by a thread where we started talking about like surgery but my brother moving back to san diego getting his job back. I was already talking to into colleagues to figure out if those plays back for me At into it so that we can a moonlight on the side. So big huge lesson there. Even though we didn't have that much cash it felt like we. We had enough that it didn't give us the sense of for galaxy and insensitive a scarcity that we just in retrospect wasted on these large projects. Not really thinking carefully so i would encourage every startup like whatever cash you have cash is king like it's something that gives you a not just a lifeline but also the ability to To make decisions on things that he truly need also read. The frigging terms of service is that that is something they still regret not doing to this day. So we're in this kind of mode of okay. We have to either shut down the company or or move to back to our old jobs one. We get like one last shot so we gave ourselves two months This kind of decision we made in january of twenty thirteen. We just don't have the time and energy. I would say energy. We have the energy but we just didn't have the scope of the product we wanted to build was way too huge. So why don't we build just a demo that will show people what the product could be. Because that's the only thing we can realistically build in our third co founder. Brian joined us at this point. We were coworkers at a into it. So we started building this product and eventually came up with this democrat. You can still see it at playground that dot com which was not an actual product. You couldn't actually do anything with it. You can save or design a website. It was just an idea for interface. For how a coder or non developer designer entrepreneur could make changes on a canvas That typically required code but do that through visual interface and we had it just felt like such a hail mary. Because you know it's not a product that people would pay for is just an idea of something and on the morning that that we try to launch it. We had lek all these definitions for this product with before before designers and for entrepreneurs where do they hang out so we found designed forums those like some rented sub sub reddit round where designers hang out and we posted to all of them and nothing really took off. There was no traffic coming from them. And i remember that ominous morning when We were just seeing that. There wasn't any coming from trying to get this into the hands of designers. I went to starbucks those like This was always ominous from me. Like my name is misspelled in. I just knew that that that felt that. That day was not going to be great. And then as a hail. Mary like some of the daily just decided. Hey why don't we try. Hacker news which is primarily a developer centric community in. We just had every doubt that it would take off there but it was worth a shot so we put it up there in. It's just over. The course of several minutes complete. We changed Flipped world upside down. It just completely flipped our world upside down we had in the span of several hours ten thousand people signing up and then through the course of the day almost twenty thousand people signing up for not even a product for something that that was going to be a product in the future and it was such a huge surprise to see the developer community like people who that typically we thought would You know they were in the past like really arguing against tools like dreamweaver or a wickson we believe cetera that that don't generate clean code etcetera. Were just giving us all this positive energy around the k. You might have actually cracked the code. Around empowering designers to build like developers build it was just say Such a huge day for us because we're deeply in debt were on the precipice of of quitting and going back to our jobs in in here. We have this amazing traction. That is just jolt of energy in hope and from that for the lesson is if you can get traction that is life for business But i also want. Don't want people to walk away here. Like hearing my story and think that oh i might be in a situation where i'm really deeply in debt or making decisions between sort of family and in startups in just want to recognize that what happened to wet flow. What happened to me. There's just so much survivorship bias in to our story that it just happened to work out. We were at the right place. The right time of hand lucked out with Being blood pudding westlund in front of the right people so that we could get that traction but like once we got traction unlocked so many more doors for us so right as that happened when we finally got a little bit more relaxed we moved to a different co working. Space now started working on the product and decided to apply. See again. This time we felt a lot more confident that because there is some indication of user demand that that we would have a better shot this time so we applied. We went to the interview and walked out of the interview feeling completely dejected. Sort of thinking. There's just no way that they're going to say yes. To us would get peppered with a lot of questions that we didn't have great answer to so Middays we decided to go to mountain view in grab a couple beers. Were still super nervous and just to kill time. We went and bought tickets to oblivion with tom cruise. Which was kinda how we were feeling at the moment. But it also happen to come out that Previous friday or whatever so. We're sitting in this movie nervously. Waiting for call in the way it works is if you're in you get a call if you're rejected you get an email And i see my phone buzzing with like a six five Area code which Kind recognize that somebody in the area. And i hope out of the movie theater in. Of course it's somebody from my saying we would love to invest You guys did a great job. Do you accept these terms etcetera. And i'm like yes in brian. Sergio ran out and obviously really happy. Hugs all around Recalling families in our significant others and got got dinner arranged and because dinner was a couple of hours from then we went back and finished watching the movie in as we're watching the movie i'm kind of instinctively. Still checking my phone and out of the blue comes in email that says unfortunately we decided not to fund you at this time and the reason is exactly why i would think that that would be rejected like your products technical for non technical users in that powerful enough for technical users. This will make it hard for you to achieve the kind of revenue as investors. Hope to see so. It was like being at the top of the world and then crashing back down to the mariana trench. It felt at the time so we call her family's and say hey dinners off. We tried to call. Why see try to respond to the email eventually. We just decided you know what we're just gonna drive over there even though it might be closed just to see if we can But a get on. Somebody's radar What happened and as we're driving there we receive a phone call. That's in in. We're sure that the phone call was in a state at this point because they didn't say the word web flow didn't say my name it was sort of like a more generic like welcome to ic- type of type of phone call whereas this is super specific so we knew for sure that this was the real rejection in the phone call was in the state and as we're driving to to their office we'll get a phone call That says hey really sorry like the email was a mistake. And i wish we had taken a photo of that moment because it was like the most elated feeling ever like if were feeling high at getting in knowing that almost rejected Truly getting in so you know we were. We were over the moon We go through the and it was really grueling where we had to wrestle with a lot of our own sense of you know. Most of us were designers. We wanted to create this perfect product. We had this idea for what people would pay for. What people wouldn't pay for it because everyone of our competitors at the at the thailand squarespace looks legally and adobe had a blogging and publishing multiple pages and a lot of other things that we didn't in our tendency was to delay launching in delayed until we had all those things which could have taken years but one thing y. c. I'm so glad that one of the partners did was like they said. Hey if you don't launch this thing if you even if you're embarrassed by it to a certain degree then we might actually kick you out Because that this is this is the point of why see to make sure that we get to some a marketable product within a very constrained time period. It was such a key lesson for us because the product that we wanted to the product comfortable building releasing in charging for we didn't end up building for another couple of years in there was much more demand than we thought for the product that we don't super lightweight product that we launched demo day. The big lesson i learned. They're like have your big dreams in look at what you want to build in the future but ship often Figure out what users need now in and try to deliver that To them as soon as possible also at every step of the moment were very uncomfortable will charging in every step of the moment we found out that people are willing to pay much more in many cases so i would encourage all startups to a seat monetization as fair exchange value but also a be really thoughtful about trying to charge sooner because it's always always harder to introduce that in the future so we're nyc we finished demo day. Of course you think you know. The story in our heads is all these other success stories. You hear before once. You're in waikiki. You're gonna have no trouble raising money So he started doing all this kind of pitch training where Extreme or at least wasn't extreme introvert. Were going up on. Stage was the most anxiety inducing thing like the fact that Even talking to this group right now is kind of a modern day miracle but we did all. This can a speech training We launched the product. We had a A techcrunch Announcement and we thought surely like the investor dollars are going to pour in and we did find some early investors that that put in about two hundred and fifty thousand dollars or just shy of three hundred thousand dollars but a lot of the vc's we pitched after demo day were either like a no but most likely a no answer or delay or a. Can you come back again. And i just remember those days being really really anxiety inducing where we spent More than a month not really building products not really focusing on anything that was important for users like waking up every day. In cold sweats pitching more people. I'm not really knowing where the company is Is gonna go in terms of runway and then eventually we met with paul graham. Why c in he gave us permission said like. Hey look obviously really hard for you guys like. You're seeing a lot of a lot of resistance from many investors in. You can just make the decision now. You have three hundred thousand dollars. Three view There's enough runway for three people. Sure you might not be able to hire the team that you want or is not an look like all the other start ups that raising three million dollar rounds at the time but you can actually focus on customers in on users when they need you most because we really starting to hit a wall where lead people notice that we weren't improving the product. We were just out know raising money in the second that we did that just decided like hey we're okay. You know not raising more actually going to revisit that conversation later in told that to a lot of the investors that were either annaba wait and see then immediately. A lot of conversations are happening real quickly so the moment that we weren't desperate for For the cash and we felt like really in of being able to survive for another year it just like a removed a sense of desperation from us in the signals that we send to other investors and maybe like a sense of fomo kitten with a lot of investors. Where you know. We really rounded out a pretty healthy seed round of one point. Four million dollars Soon after we decided not to raise more out so maybe the lesson there is like investors. Want to invest disproportionately to how much you you need them to invest. So the less you need their cash the more they're willing to invest in again. You know we felt really happy that we had at least at financial burden from out under but then we kind of like switch back into normal startup mode you know. We got an office We went to key. Got a bunch of desks with them together. Got a ping. Pong table got interns. You know build a kanban board wrote down the big Vision that fifty percent of the internet is going to be powered by web flow and started doing retreats got another office those lot fancier got like a started having christmas parties. And then. I had this like big moment where i was sitting down looking. How fast are revenue was growing. Which was not that fast and how fast expenses were growing which is really really fast in the curve. For how much have fast. Losing cash was really scary. And i figured that we would be out of cash and eleven months if something didn't change because actually starting to accelerate allure hiring people much faster than we were growing revenue. And that's when i decided like. Hey we really have to focus on sustainability in being default alive Rather than having to go back to that same experience of having to raise money just because we have to so it really focused on defining our pricing we started working on product are visual. Cms that that was going be a major revenue driver We launch dad. Remember the this one moment. Coming over after the launch of the workflow. Cms coming to the office over the weekend with my wife and kids because we would sometimes go to the city and go to the zoo and stop by the office. I was sitting there At my desk looking at revenue dashboards in quickbooks where we could see expenses and i realized that like art. The graph was inflicting life. Revenue was starting to grow faster and we releasing sweet decided to slow down hiring Our expenses were growing much much slower. And i finally had this realization that we might be sustainable without any additional cash. Put in to the side where i saw my daughter and i took this picture where she was writing on the wall. A web flows is the best because my dad works here. And i had this moment of like realization of freedom of like. Hey this is actually something that can last in endure forever if we choose for two because we are now in control of the two main variables of revenue and expenses because we can make the choice to be sustainable and in that felt like the ultimate freedom at the moment where we just. We just felt that maybe will grow slower but we have The that lever to pull of how quickly we grow in how well we serve our customers and don't work work ourselves into a situation where we're desperate to raise at just because we have to just because our Our expenses grew much faster than than revenue. And that just puts you in the driver's seat. It gives you the ultimate freedom to optimize your people your mission vision in less so just the sheer survival of the business in just a little tidbit like that when we launch at cms the inflection. We saw revenue without was going to be game changing. But in retrospect if you look back over the course of time like that's the that's the blip that that was which maybe there's a little mini lesson here around This is really the long game in no single feature that you're gonna launch his gonna be a make or break thing focused on all bringing value to your customers and let them in compounds over time. Vanda makes it easy to achieve and maintain sock to compliance automate your security monitoring with banta and get ready for sock to audit in weeks instead of months learn more and redeem a one thousand dollar off coupon at vantage dot com forward slash sastre again. That's advanced dot com forward slash faster.

vantaa Ceo blad magdalene Wicks westlund alec providence sacramento bryant sergio twitter reddit phil
Ask an Angel with Zach Coelius: is moving to SF still worth it, bubble/recession potential, post-COVID funding & more | E1172

This Week in Startups

55:29 min | 6 months ago

Ask an Angel with Zach Coelius: is moving to SF still worth it, bubble/recession potential, post-COVID funding & more | E1172

"This week in startups is brought to you. By vanda compliance and security shouldn't be a deal breaker for startups to win. new business. Vantage makes it easy for companies to get a sock to report fast. Twist listeners can get one thousand dollars off for a limited time advantage dot com slash. Twist gusto running. A startup is hard work but thankfully gusto makes payroll easy. They also offer flexible benefits on boarding and so much more twist listeners. Get three months free at gusto dot com slash twist and linked in jobs. A business is only as strong as its people and every higher matters. Post your first job for free at lengthen dot com slash twist. Hey everybody hey everybody. Welcome to another episode of ask an angel live here. We are with zek. Holiest who is an angel investor in how many companies act now gets a fifty fifty company. Keep sound like the number will. Yes you've been having exits and you started angel investing in earnest in what year to fifteen got it. So you've been added for now into your sixth year And so you're averaging basically an investment a month is that philosophy increased or decreased due to a month. Now what are you what are you doing. Yeah it's about the same Check size has gone up quite a bit. But usually it's the al find a company a month of i'm lucky come in fits and spurts silica appeared run for six months and then i'll do five deals in three weeks kind of crazy our exc. What's the average check size for you now. And where did you start. So i kind of a barbell strategy for early stage checks that can be kinda two hundred to a million for later safe checks. I can do to five million series being later when i first got started. I think i was lucky to two hundred k. Chat that was like. Oh yeh deal yeah. Yeah are you still doing Investments via syndicate or just from your fund. Now so i have three vehicles that i deploy off. Now i've got the main forty five million dollar fun with industry ventures as a sole lp and they basically are you know they have lots cash and to help them. Put some of that to work. And then i have a rolling phone. I sort of friends and family and people who want to deploy alongside and that operates in parallel. Everything's the same as industry fund. And then i have a twenty five hundred person syndicate on angeles which is actually gonna superpower for me which. I'm sure you like. They bring me deals with diligence. It's it's like twenty five hundred people in my team like when we show but a brawl. I've got an rv. It is one of the things that i think nevada who really created this movement. Shout out to navarre ravikant. He really got right. Which was hey having more. People involved is a good thing whereas most people said. Hey you just want to have two or three people on your cap table. It turns out when you. I think our average joe now is one hundred fifty people per syndicate at the syndicate dot com. We started an angel. We moved to the syndicate dot com. But you can find zach at angel dot slash slezak A zakho e. l. i. You ask for those people who don't know how to spell it coleus and what's really interesting about that is you. Get those hundred people on one item on your cap table correct. Yup i manage everything so you know princess. We just sent out an update for mud water. One of the companies invested in you know couple dozen people send me back notes about ways they can help and then i kind of filter those in passed through the founders so i serve as intermediaries awesome and so tell us a little bit before we get into the questions here about a rolling fund. How does that work. How big is the rolling fund And is that something that you think is going to be sustainable. Because it seems like that's an unnecessary peace between the fund and the syndicate. Why not just to get in the fund. It seems like he knows the third piece is a little confusing to me. Explain why what that is. Why it's necessary rolling fund. I did because after swimming fund. A bunch of my friends reached out. Like hey ed let me get in on. That wasn't an opportunity to do that. And the great thing about rolling fund. This is super lp fron in that you can sort of like have a fire and forget fun Put in capital when you get cross collateralisation across a large number reimbursements. You don't have to pay any attention but you only basically are committing on a quarterly basis so every quarter you can be like. Oh that guy's an idiot. I'm out of here more capital for him or you can be like. Oh i need to buy a house. I wanna not invest this quarter and the next former. And then i wanna go back up again and three quarters or whole i just went public company with public and i want to increase allocations. And so it's a much more flexible model for the ps. It's super flexible and for me. The syndicates kind of its. I've struggled with the syndicate in terms of writing quick small checks. So like if there's a you know a small fast round than any coppola into the syndicates. Not a great tool for that. It just take does take four to six weeks. Yeah too much time in a lot of energy and so like i really prefer for the quick smaller estates checks to pull off of an existing pool capital and so. That's that's really where a lot of my friends were looking for early stage exposure their life. They wanted to get in early soft. So that's why we did. The rolling sense. Essentially me actually expand that way makes total sense. Yeah a syndicate for like bigger states checks. It's a superpower but for the early fast checks if we're gonna write a two hundred k check it's slimmer worth like all that bother for everyone. I think you and i have figured this out. Which is i have a fund forty four million dollar fund paradoxically enough and That complements the syndicate and so one hundred percent of our investments are in that fund. And then the syndicate does probably half of those deals if the founder wanted to the syndicate they have to opt into it and there's an allocation available so it is a pretty amazing how has grown over the years. Let's say a couple of questions here. Our first question comes from matthew matthew asks is it worth moving to san francisco right now for young entrepreneur question. Mark some context. I recently saw my startup company in san francisco but i'm currently based in connecticut. I working as pm. That's product marketer. I'm sorry product manager for a company that purchased us with plans to move to san francisco soon to work in person. I am planning on launching another company in one to two years zach. This is a question you and i are getting the future of san francisco. We're taping this. In february the literal i think this is the twelfth month of the pandemic it is and san francisco has been rocked. So is it worth moving here for young entrepreneur. Hell yes so the way i think about it is rents are collapsing here so it was very unaffordable to be here. You know twelve months ago now. It's just pretty much affordable but the density of smart people who work in technology is unsurpassed anywhere else in the world ten times more people on a density bases are in this city at anywhere else in the world except for maybe shamed. So if i were you move here. This is the party. that's so. I will take a counter to that. Which is it used to be absolutely the advice to come here immediately if you really want to advance your career because we all know that the density of investors and the density of founders is there's nowhere greater but the city was so horribly expensive. I think it was like something like forty two hundred dollars for a two bedroom or something crazy like that. So you start looking at if the average person is in a thousand dollars. That's drop down to three now. So that actually is an opportunity you know instead of it being. I don't know fifty thousand dollars a year to live here in just a base level of comfort two bedroom Which i wouldn't say extravagant by any means you're talking about fifty k. post-tax if you're paying yourself hundred fifty k. At your startup in your series company. That's a lot which means you're after tax income you're paying sixty percent of a torture rent basically means you're not saving. You're going to be up against it. What has changed now as investors are investing one hundred percent over zoom and. I do think that that trend continues. So you don't have to be here. And i do think. La miami at austin and salt lake have really great communities colorado as well. And you'll have. I would say close to equal access to venture capital Not maybe ninety percent eighty percent. Because they're all investing of course it's depends on when we get back. I think we're back. May we'll be back in business in terms of in person meetings. Therefore it's kind of a jump ball. You can't go wrong coming here. But i do think you can go right in austin miami colorado and other places and your cost of living will be much lower. So don't think you can right. I guess is what we're saying. But i do think those you do think there's other places are also an opportunity cracked. Yeah if you would ask that. Two years ago. I'd be like sim cisco's disaster on many levels but you really have to be here now. I don't have to be here. But i do think that it is. It is the density is so much higher. This is a better place to be. Yeah and rents. According to jumper shuttled somber were minor tiny little investors but or happy to be in their thirty four hundred a month twelve months ago for a one bedroom down to twenty six fifty. I think that's probably conservative. I think it's even more twenty. Four percent decrease year over year. I think it's even more in the and the amount of apartments available his unbelievable and now oh by the way. They're also giving two months free rent here now. So if you that number i gave. I don't think includes that you've put included two months rent. I do think that it's probably more like forty percent down. Twenty six hundred apartments plus for rent According to upper right now as of today two thousand six hundred seventy one coming like salesforce just announced that they're going to go to like a hybrid remote with a couple of days a week for some of the folks. I think a lot of companies are going to do that. And so you know i think a lot of a lot of people are gonna move out but a lot of young people can move back in because the city is much fun place to be when it's full young people rather than old people h- absolutely and when it's fold with artists and restaurants in the store fronts don't cost twelve thousand dollars a month maybe somebody could open up an experimental. Oh art space a club or something interesting and avangard and we've seen this creative destruction over and over and over again so it's actually good for society i think and it's also gonna make san francisco have to be competitive because people are just do not want to stay here pay the taxes and get a really bad level of service. Focus instead on conquers. How many people do you know have been a of crime in the last year or two. Oh my god. I have a lot of. My friends had basically been like either mugged like literally mugged on the street. That's like like is becoming a common thing here Burglaries commons like used to be just like we all get our car broken into a few months like that was annoying but like you know when people breaking into your house like muggy herbie violently this. She's got stock. I would you know. Listen i i'm for gun control. If you live in the city you live in san francisco and you do not have serious armaments and doors locked. You're crazy because your house will get broken into and the personal likelihood is gonna be high as f and they might kill you or your family. I know that sounds crazy. But we are having many homicides in san francisco many people being beaten up and the crazy thing. I never saw this old people being beat up. Why it's one thing i understand. You're arranging your out of your mind. You steal a iphone or somebody's video equipment so the video of people breaking into the back of a prius. That was moving turned into cough city like literally. People are jacking cars. That are rolling down the street. These people broke the back windshield of appraise to take out video equipment while the cars moving. That's how crazy it is. This is how craziness. I think it's true but it also like it might point like that's how powerful the density of technology people. It's stephen with all that's just insanity. I think it's still like the being able to be in person and go to dinner parties and hanging out with like come to your events. Come to mind man. it's just like be here is like is a big is a big delta over based in miami are awesome i is sock to comply. It's critically important. You hear it all the time sock to talk to well if you don't have your sock to you can't close major companies as partners and as customers. It's that simple. And guess what vantaa is going to give you a thousand dollars off your vantage compliance process. And this is something. That's very important what they're gonna do when you get your sock to with vantaa is they're going to continually test against technical non-technological talk to requirements and they also have partnered with over two dozen auto firms who have been trained to file sock to reports directly in vanda on average the vantage customers get their sock to compliance in just two three or four weeks. Compare that with three four or five months without vantaa and you understand why everybody going crazy about it. I just had a twist listener. John email me. He's got the drone startup. Kitty hawk. You may have heard of them very famous. And he says vandellas essential in helping them get socked to compliance up and running and he loves their. Tian's google slack get hub in aws which are all essential apps that run kitty hawks awesome. Business again is giving twist listeners. A thousand dollar discount on their subscription right now. And i know many of you take advantage of it v. a. n. t. dot com slash twit vantage dot com slash twit for a thousand dollars off. Okay let's get back to this amazing episode math sitter says thoughts on free apps with high growth versus paid subscription apps with low numbers. What looks better angel. Love the pod. Jason is a great question. Zack what would you rather see a free app with high growth or more say slower growth but with paid subscriptions having in both of those dynamics there just two levers to the same. Ns hates the free app. You know the question is like building. a free. App is not the long term goal because it does in Good so how are you going to monetize that and once you start adding on vacation you basically have to start thinking about you know slower. Growth against that sort of cohort abuser base. Do you force people into tighter. Tighter funnels us advertising. Like how do you make your money. and so if you have a free app in heaven yet figured out what that monetization looks like that. Risk factor decreases evaluation. Because no. what's going to happen there and until you figure it out like we have to assume that there's a good chance of won't work on the other hand if you've got a paid up and you're growing really slowly kneel. You might need to figure out how to juice that brooks because without without growth stability no investors are gonna get excited because we're all in the business of the billion dollar plus outcomes and you know if you've got your own slow you're never gonna get so you got to figure out how to get there. I love this answers ac because really when you look at it. Growth is the key. If you are growing as a free app. I would expect you growing five percent per week. Five percent week over week. Which would be you know. Let's call a thirty percent month over month. it's free. You should be growing fast at least twenty thirty percent month. Now if you're paid might expect you to grow ten percent a month which means you double every seven months. if you're free you should be doubling every three months in terms of use and listen the number two investment. We ever was calm. Who's the first syndicate we ever did. And they charged and they used to charge ten dollars for the app. One time then. Subscriptions came out and because of subscriptions consumers are now very delighted to pay monthly or yearly subscription for sixty to three dollars a year. if they're getting value from it i believe i prefer the consumer subscriptions. I'll tell you. I think it makes people more focused on providing extraordinary value whereas when you're free you kind of provide value but if they're not paying it's not extraordinary so with some rare exceptions like clubhouse or a social network i prefer super i mean a great subscription consumer scripture. Now is catnip for me right now. I will roll over and i'll jumping through hoops for anything. I have right now. Stacy for dance com for meditation and mental health and sleep. I have tone base for classical music. I have used issue in for many different musical instruments. I have seoul savvy for sneaker heads in a community paying for consumer subscriptions brilliant dot org for learning math. Did i miss any nick on my consumer subscription. I think i'm missing one or two anyway fit bud. I didn't say v dot. That's the second most successful one for cross fitness training. Thank you nick. so i love these consumer subscriptions. You know what. I viewed as the continuation of what spotify and netflix did people were like. I don't know how to pay for our music subscription. i don't wanna pay for online video. Remember like people were wondering if people would actually pay for that and now it's like do you know anybody who doesn't have a music subscription to either apple music or i mean nobody so Both of them can work. I think is a long way of saying it. Okay let's go back to the top. You're we're gonna take one of the pre questions came in again zach oasis here. Follow him on angel s. follow him on twitter He's zack z. A. c. h. Ceo e. l. i. Us he invest two hundred k. Two five million dollars from his fund his rolling fund and from his amazing angel syndicate with thousands of members. You can join any of those reader to the three of them. You can look up his rolling fund and join that if you're an accredited investor or you can be involved in his syndicate and if you're founder you could just d- album. He's one of the great investors love doing business with my man. Zach ahmed asks. Do you see us heading into another recession. anytime soon. is our bubble about to burst. If so what are some warning signs. What sectors. you assume. we'll be safe. Slash remained relatively unharmed. Exactly i'm gonna throw you. Are we in a bubble or not is a recession coming so gonna do the total cop out a both so might use the long term technology trend. Like if you look at twenty years from now we're going to have self driving cars we're gonna have. Vr field surreal. We're gonna have air taxis. We're going to have electric planes. We're gonna have all this shit that if you think about the work that's required to build that from here to there. The technology invented the programs needed to written the all the stuff we need to do. We in the technology business have twenty years of work ahead of us before we get close to what we can imagine. Letterman was caning. Imagine yet and so the long term trend technology is now. The thing about this difficult is what happens. Is you get growth. And then as growth to occur investors. Get a little cited and they start investing against kerr and then they drive that that capital drives up growth until it becomes unstable falls over in itself. And we're getting a little crash and so this very normal in this twenty year cycle. We're going to go like we're gonna have definitely gonna have downturns and we're going to get some beatings adventist but if you're a long term investor technology or long term of newer technology role player in this game. Just focus a little term in your good if you'd think in decade-long increments. You're gonna be fine when zack said it's moving like this for those people listening. What he was showing was a wave going up and down but trending up. And what zach. And i have learned in our careers. Is you know uber. And airbnb were started right after the financial crash of two thousand eight tesla facebook and google grew through multiple recessions. Straight up into the right. So when the market crashes the great companies who are capitalized prop- properly in other words. They have cash in the bank and they are not burning tons of money they benefit from it because they get to gain market share. They get to deploy money when money is valuable right now. There's so much money in the system and something's really changed since we started. Zack is the ability of coming to go from one. Geo to hundred geos that used to take decades like it would take microsoft. You know ten years to go into europe. It would take another decade to get into india. These were decade long processes. Now you look at something like com dot com or clubhouse you know they they can go into another market and even localized into another language so quickly because there's all these third party tools and infrastructure. If you if you put yourself on you know a certain cloud computing platform. Whichever one it is you basically get a global footprint almost instantly if you want localized by language put in a little sdk and all of a sudden there's all these outsource companies that will translate right so if something does stick the ability to go around the world with it is unbelievable. I think there could be a recession. I think a pullback could happen this year of twenty or thirty percent which is i. Think the recession territory But given all the stimulus and giving were coming back from the vaccine and a year in quarantine. I think it's yolo for eighteen months starting in the spring which means i think it's going to be an up into the right market until two thousand twenty three that's my guess But it nobody could be pullbacks along the way but always You know if you're doing what we're doing which is investing in companies for between ten and twenty years like you know i'm i'm in my second decade of olding owning shares of uber and i'm not selling them because at a record high again today and i think that they're gonna come back from this crazy pandemic and be even stronger. Let's take another question. This one is from chase. What companies are you most excited for in twenty twenty one and a post covid economy. Great threaded question here. What do you think exactly what what excites you. Post covid economy. You know. I actually have no idea like my favorite part about this job. Is people come to the door. And they dropped these wisdom bombs of just like. Hey check this crazy thing out. And i'm like oh my god that's new because if i have the idea it's not a new idea 'cause i'm just an idiot around like talking to people like you really have to have your hands on the metal and really understand what's going on the markets come up with a new idea and so if i it's not a new idea it's the flu crippen new things and will make tell me. My job is to hopefully recognize how awesome it is not idiot. Be like got stewart like. Yeah i go see. We're going to see. And you know. I think the mar- the public markets are a great indicator if you look at the travel stocks and you look at disney. I think that the pandemic did is any crisis like this promotes change and I'll just pick three companies. Airbnb uber can disney. disney said. Well you know what we were gonna make disney plus the focus of this company but we have no choice therefore did you see when they had their disney day. How many shows they're making for disney plus. It's like disney plus amazon prime now. It is not the sideshow the show and i think the parks are a feature of disney. Plus you by disney. Plus you get one day at the theme park by disney plus plus and you get you know whatever a family pack for the theme park and disney plus logging is your theme park logging. You go there. They take pictures of you. You open up your disney plus app. They'll be a tab. Here's the photos of you at disneyland and imagine just that one simple idea. Disney plus has the theme parks integrated into disney plus so when they launch a new ride. You get a trailer of the new ride and it says. Click here to book a day and the booking and your wristband is disney plus wristband you show up at the park. You know You make your reservation through disney plus now imagine this okay so then you add vr. You'd go visit the riott you put on your headset and boom. You're disneyland and genius or you're a disney plus plus subscribers plus plus plus like you just keep adding classes five plus subscriber and that gives me whatever access you know weekend access or whatever you start thinking about the possibilities there so all of that i that was probably a five year in the making trend that got compressed into one year and they got rid of their yearly passes. They just got rid of them. They discontinued those season passes which i used to get when my daughter and i used to take her whenever she had like a day off from school. Or we'd call in sick and i would just take. Her at disneyland on. Wednesday was great doubt of the year. And so that's just one example. Now imagine all of their. They don't have this in there yet but disney plus all their merchandising. You open up disney plus. I'm on the mandal. I'm on the mandalorian page. And i say bye baby yoda. Why is that not set up. I mean what are you thinking disney. You don't have you know a thousand or a million or a hundred thousand limited edition. Baby odors only for sale to disney plus plus users right. It's a no brainer. Now let's go to airbnb. Airbnb was spending too much money that had too big of a staff. What do they do the second. The pandemic habits they cut a third of the staff now. They're lean they're mean and they had their largest couple months ever. Then you go to. They were like you know what the rides business was the focus. Now wait a second. We could be amazon for two hour delivery. What if we get every bodega store every local business to put their inventory on here and deliver. They just started doing that. I find myself going to the app now. Going to uber eats to- order soda or drinks and they bought drizzly and etc so there's a brave new world all those companies are accelerating their accelerating and then just think about the movie. The i think disney should by amc now and if you're a disney plus user imagine this back you can go see the mandalorian on whatever tuesday wednesday thursday. It's playing twenty four hours a day. You can go see the last three episodes in a row including friday's episode. Or you can wait for disney plus on friday but if disney plus plots and you pay forty bucks a month instead of ten you get two free tickets. Can you imagine how great that would be. I mean it just makes me so excited about what could happen as we really open up the aperture. What's possible listen. Twenty twenty was a crazy hectic insane year my god. It was like a decade in a year and there was a lot of uncertainty. Let's face it. But we're going to minimize our uncertainty in twenty twenty one and we are going to start the roaring twenty. So let's switch to a smooth and painless payroll and hr system gusto. Is that system. And it wasn't just built for small businesses. It was built for the people behind them. That's you and me. Online payroll is so easy to use gusto. Can automatically calculate paychecks and file all your payroll taxes. Easy peasy three out of four customer. Say they run their payroll in ten minutes or less. Which means you can get back to your business. Heidi who manages operations here at launch. She says gusto freezer up to do more business. Critical tasks like running our syndicate. They offer unlimited payrolls for one monthly price. There are no hidden fees. And they help time tracking. Lot of people need to do that. Health insurance critically important. 401k's be generous with your employees on boarding commuter benefits offer letters access to hr experts and more and if you're moving from another provider gusto is going to transfer all your data for you. No surprise ninety. Four percent of customers are likely to recommend gusto to a friend. Of course they are because it's so easy. Here's the best part because you're twist listener. You're going to get three months. totally free. Play have to do is go to gusto. Dot com slash twist that's g. s. t. o. Dot com slash twist. Let's take another question is a pre question. Now have another ahmad very popular with mods. What do you think of crowd funding and do you think it proves product market fit. So i'm gonna say crowdfunding will say clearly that's indigo and kickstarter equity crowdfunding. You sit crowdfunding. Is that a good proxy for product market fit in your minds. No i'd say people are willing to pay money for something. Then there's interest the question is simply you really still have to drill in figure out if it's nisha interest versus a wider sort of audience. Because you can really do really successful crowdfunding really fodder on you know on those platforms. It just don't have a broader applicability but in general whenever you can get people to pay for something. It's a good signal. Yeah so. I think this is very important. There are people who are very good at doing a kickstarter. And what i found in my portfolio is sometimes those folks are so good at packaging and sizzle. But they're not good at growth and sustained operational excellence. You know because they haven't developed that muscle so it is nice but a lot of times. The reason people do well they under price their product so they sell a product and they give a discount on kickstarter indie gogo. That's not what goes therefore. If you're one of the first thousand people you should be paying two times or three times as much of the product to get an early and you have enough margin there. What i find is people get desperately. Take something whether it's a camera whatever Charge to a little for it and then they are already losing money to like literally. You've probably had these pitches where people raised a million dollars on kickstarter in any gogo and now they're trying to raise a million from venture to deliver the first million products. And you're like what happens if we don't invest it's like those people don't get their product and that was one thing that kickstarter any go ahead of big problem with so it's a great question. We'll take a question from the live audience. Matthew asks when the us legalizes cannabis on a federal level. How do you see this. Impacting investing in the sector heads. I i've been prevented from investing in cannabis companies because you know mile. Ps major listen. Everyone else sucks same. The whole marijuana legalization thing come on. We have to go faster with Should've been legal thirty years ago. So i hope we can. We can invest. This would have been such a no brainer for obama in the second term my understanding was obama was considering in the second term. He never got there he didn't want do it in the i. I'm just as somebody internally said. He didn't want to be like the first black president and like in his first term. He like lena legalizing cannabis. There was like some idea that he wouldn't be taken seriously. and I think race had part to do with that thinking and like the pulse. Moore's which is really weird. But i was told that he was gonna do it in a second term. He didn't then. Trump was a no-brainer for trump. To do that he would have made so many people if he would've endeared himself the stormy but he didn't do it. Now we have biden and kamala come on guys like ninety percent of people in the united states wanna see. This legalized is legal in almost every state. Just do it candidate. We kill a candidate. Beat us to stop. Just get it done. And we cannot from our fund investors. So people know when you have a find you have. Lp's the lp's you have have lp's especially in the case of industry ventures earn their refund of so they have lp's so all those conditions get dragged down so adult weapons and anything that's illegal. Basically you can invest in. I can with my syndicate invest in these things and we've done one investment kush In which is a marketplace for cannabis. But we will be on it big time and we're also going to invest in it. It's a little bit of a joke. There were up to marissa are the private markets marisa. I'm assuming mayor are the private markets now less crazy unless less than the public markets zach qiwei bonkers out here on the streets it's bonkers. What's a crazy shit you've seen recently. We had one last fall. Three hundred k. a. r. three hundred k. Era okay twenty five cam month in mirror auction seventy three. Pre what you so. That's eighty post. Yep he's that two hundred times or having you out of his crazy we've had in the last six months. I've had multiple deals where we invested at like ten and then two months later somebody else marks it to twenty five or thirty two months like no no significant change in the business. Like what is that in your best when you're an investor and you see that happen you're obviously getting to write up in market up in your books but let's be honest. Reality has not changed. Significantly with the exception of more money being in the bank account and more dilution occurring. Is it a good thing a bad thing. Does it make you worried. Or how do you manage that when the founder says hey invested a million at For ten percent now somebody wants to put in two million for ten percent or three million for ten percent. Whatever number of months later what advise him to do take the quick easy money or just. Keep your head down and focus. It really depends on the business. I mean some some assists really have that ten twenty thirty billion dollar market cap upside. At which point. I say pedal the medal in terms of like we we want. This rocket ship has a long way to go and we need to name. We need to go as fast as we can without breaking up ship which is always a challenge. You don't wanna too fast because it breaks up but you really do need to really throw the throttle van when you've got to go that far for other businesses that just don't have that upside and where we can get a tune to five hundred million dollar exit be super happy. There need to be more careful about the coppa we bring in. I we manage that. It really just comes down to like what that trajectory looks like where they are the girls cycle but in general where i invest. It's so early and we had so far to theoretically go that if good founder investor fit happens and they like the investor and we can put the capital of work unlike. Let's go for it. I love that answers act. Because you and i are so paddock on this. If it's a great and vassar and it's an affair valuation good valuation or valuation. You take the money. It's a great investor if it's sequoia if sacks if it's trump pick who your favorite investor is great track record. What's the downside. It's it's a fair price. You take the money now give it a great price and it's an okay investor. I still take the money as long as you have to. Give up control writing. You're not giving up too much. But what i always tell people to do is look at that opportunistic money and don't spend it like a drunken goddamn seller so keep doing. What got you here as mark. Cuban says whatever got you to your keep doing it. Man keep grinding. Don't have that money. Get you distracted makes you think about up new officer redoing the receptionist. Ask in spending money on stupid shit. Don't do it but if you look at that money and say three million dollars. We've got our customer. Acquisition costs are caq dialed in and we want to try to more channels podcasting and we wanna try radio or whatever it is or outdoor advertising. Moscow do it. You earned the right you to take tumor swings at bat and yeah if you lose. Let's say in this theoretical situation your company they raise two and a half million dollars for ten percent and they spent two fifty on podcasting in two fifty on outdoor advertising and one was a waste of money in one worked crate. You earn the right to take a little risk. Their great great question okay streak habits. Do you still invest similar startups. You already invested in. We're just a conflict of interest. How do you deal with this. Because you know you and i are starting to have large portfolios you have people right into all kinds of different businesses. How do you deal with the conflict of you. Invested in a left an uber or you invest in uber and postmates. I have friends who invested in both companies and then uber adds ubereats. Yeah i had apple remember companies that have sort of like swayed in new other. But generally i try to avoid that more noon batsman because not my job is to be able to be there when the ceo is like dealing with a difficult situation in they need to talk to someone who is not on their board is not the boss can fire them. Let's say they get sued or they gotta some issue with their employees and they need somebody give them the god's honest truth they can call me and it's difficult. I can play that role. If i'm basically like doing that for two competitive companies and so i'd have competitors for new investment but if they search sway together than i have to maintain a chinese wall may have to trust me. That i'm gonna do that. And if they don't send that can tell me into they want. Yeah and the firewall or chinese wall by the way chinese will not a derogatory. Actually a compliment. Somebody tried to cancel muzak for using the chinese wall. But when i was like hey dip shit. I know that like you want to cancel everybody so crazy. Ask one hundred people. Who are chinese if chinese wall. What chinese wall means it means. The chinese built the longest running most well-built wall in the history. It's a complicated big it over. Yeah they have one of the great innovations in the history of architecture. It's a compliment. But what the firewall means. Or the chinese wall means is you would have information from one company fire-walled or be imagined the china separating it from the other company so it wouldn't happen if this has happened to us when it happens to us typically because a company pivots. Oh i'll just put jackie or asha in of that investment. I'll take the other flip a coin and no harm no foul and we will actually do adjacency so we have a company that does baby massage kid massage along with sleep stories for kids now. Is that directly competitive with no but just sleep stories. Yes they've story for kids. Yes they do massage. No and what that does it actually helps me with the com team. Because now i've got investments that if they want to aquisition later okay you know maybe these two companies could come together which is exactly what happened. Postmates uber We had a company we invested in space. Which is doing a casual audio rooms. for creators for enterprise so it's a slightly different than clubhouse and then compete dot com Austin smith's or awesome. Peter smith now. He changed his name He pivoted to compete. Fm which is also in the kashmir audio space. Not my fault. They people pivot into direct competition with each other. Just like the postmates. Investors would never know edward breeds. New year is here. It's twenty twenty one and you got a fresh start for your business. You're probably thinking my god. We had a great twenty twenty where profitable. We got a little money in the bank. It's time to expand it's time to build out the team while we're doing that here at launch this we can start doing so all in pockets doing so well. We need a second producer and a third video editor hiring community manager. Things are going gangbusters. Where do we find the most qualified candidates linked in jobs obviously da. We love using lincoln jobs at launch. Because we can manage all of our job postings and contact candidates from a single view. It's all streamlined into one simple screen. Just how we like it. And whether you're shifting your business hours were hiring more remote employees one thing that remains unchanged is the importance of having the right people on your team. You're only going to go as far as your team will take you when your business is ready to make that next. Higher linked in jobs can help matching your role with qualified candidates. You find the right person quickly. And those the two things you're looking for speed and quality speed and quality. You want that position filled by high-quality person yesterday and that's what linked in jobs is going to help you do all this works from your mobile phone. No matter where you are. So go to lincoln dot com slash. Twist and you can post your first job for nothing to lose lincoln dot com slash twist to get a free job posting once again lincoln dot com slash twist to get a free job posting right now terms and conditions apply. Because they're giving you free job posting. Okay let's get back to this. Amazing episode is what christopher jason. I am working on a company based in bulgaria. That automates ecommerce processes. What advice would you give to gain customers in the us. What are your first steps. What are the first steps. You would take zach for somebody who's not basically united states to get customers united states to do that the question what i like to say when i say it's often attributable horta here said but if you can't cold call customer you've never talked to before at nine o'clock tonight on their cellphone while they're putting their kids to bed and tell them what you do in one sentence and instead of them say fuck you instead this i truck tomorrow. You're certified. it's not a good one because you don't actually. You're not you need to be able to be creating so much value that the customer's pain or the value that they think they can get from. What you're delivering is so significant that you can break through the walls and the barriers to customer acquisition. Because it's so good so think about uber uber. For started if you went to somebody in the streets san in two thousand five and said hey you can push a button on a phone and a car will show particular you wanna go and you don't have to pay for it and it's a clean car and it's fast. It's already everyone in the streets will be like. Oh my god. Can i have to pay for. That is so powerful until you're started doesn't have back level of value proposition. You need interest on what you're doing to get to the place where the customer acquisition become easy in the beginning of the startup when you're looking for what to build you want interest until you find it so the it's the interaction has reached that point value because requisition easy everything else becomes hard story but so great so great so you gave an answer. That was an e that he didn't ask the question for and i really love that. Which is you know it's not about reaching us. Customers necessarily like through some techniques. Like i immediately started thinking okay. Maybe you can hire somebody in america or maybe hiring sdr. I started thinking like on a very tactical basis. You you open the aperture of that question and your answer and said well is your product. So good can't be ignored and that it is drawing people to it if you're not in the united states and that is a great way is be so good they can't ignore you so good that they seek you out. This is such great advice. I'm not going to give any more pragmatic advice on such a good answer. Let's take another question one hundred you now that when you don. I just got out of the way here. We go. brazil's underscore our nine ask. What is more important the idea or the founder. I know where you're going with this one. If i had to choose between gritted integrate founder investigate founder because great founders always end up come up with great ideas whereas great idea with if you don't know the founder you can fuck up a great idea release so precisely you could have the greatest idea in the world and if you suck at execution you're like i've got a great idea. I'm gonna make this incredible service. let's pick one that we love That's reason i'm going to build com dot com robin hood even better. I'm going to bill robin if you can't execute what's the point. You need a great founder. Who is so charismatic. They they all genders even know genders they that founder they them can inspire the greatest people in the world to join the team and make the greatest product as you talked about in your previous answers. Act it's all about execution. A person who's asleep can have a billion dollar idea in their sleep. They could be an absolute idiot. You can be a schmuck moron a dope a dope could come up with a brilliant idea if you can execute. There is no point the founder and what is a great founder scale the ability to lead the ability to draw talent and attention to the mission of the company and to stay focused and to stay goddamn solve it with cash in the bank which was dovetailing with another question. Let's take a question for patrick. What skills would you should just a founder build on in order to make the founder and founding team more marketable for bbc investment. What a perfect dovetailing goes back. The thing that the founder is it's it's the hardest job in the world because you rise to your own personal level of incompetence rocketship ryan into that brick wall. Whatever it is you suck. You're gonna hit at really high speeds so if you're near the on musk you start a company Zero two billion dollar business. A hundred people come work for you for free every vessel with tv money but if we look at the history of ilan he's almost going bankrupt so many times and he's like and he's the goat right now you look for ways to use a founder will run in your walls for competence. I think the number one skill founders really need to be good at it is long having the self awareness to realize what they suck at to having the ability to learn and like when you hit the halls such good so far of it. Put yourself back together and figure out how to get around it. It's self-aware is so underrated when you're in the cockpit and your other one leading the team if you're self aware and you can no i suck at this. I need help need to either. Add the scale or at a person with the skill that makes you a great leader that makes you more fundable. The person who in the meeting when you say. Hey what's your go to market and you say you know what we really need to work on that right now. It's all word of mouth and organic and it's going well. We're growing five to ten percent a month but it is spiky. I really need to find a great paid marketing person. I really need a great. Pr person to get us organic reach. And i need somebody who specialized in envir- -ality i am actually interviewing for each of those three specific goes. I might find one person with all of them. I might find three people. But if you know anybody i really need in. Which or would you do those in like. When you have a founder talking to you like that zach and they're that south wearing suck had growth. How do i become great at like so investable so investable because nobody has all the skills right. Nobody has all the skills i mean. There's some people who are pretty close. I mean i would say a lot in if you look at the evolution of ilan the fact that he's become a masterful marketer and communicator. Without a pr firm with spending zero dollars advertising and he basically takes up a disproportion amount of market share in terms of ideas is pretty amazing. Okay let's take another question when came to us from jackson. What qualities may travis calsonic great entrepreneur and some of those same qualities eventually to his exit. Did you invest in uber based product or strictly the founder how can founders emulated travis is best qualities without taking it too far all right. Listen he's indefatigable indefatigable and he is resilient and he's super pumped And he's brilliant and he's a great leader and he's relentless he's driven. I mean so many great qualities succeed. He taught me in a great lesson around that like when he first started uber. And i were at a party at the first round capital office and he told me the idea. I was like dude. The taxi lobbies fuck you. There's no way you can break through those guys. It's a brilliant idea. But there's this really insurmountable barrier between you and success and he was like i'm a fighter and i'm gonna kill karate that i didn't i didn't quite understand. Is that investor. I was investing at the time. But like i didn't understand that like sometimes the biggest opportunities are on the other side of what seems like insurmountable walls and those entrepreneurs who can crash cymbals walls have a blue ocean on the other side to grow to infinity it sometimes. A certain company needs a certain leader and it could be different leaders at different times. But sometimes you need to see jobs to say stop making so many goddamn average products are good products and you. We need one product for professionals one product for consumers. He drew a four quadrant and he was like we want to have the best product for consumers That's portable and the best one for their desk and we need the same for enterprise and he was like okay. Here's your mac tower. Here's your mac. Here's your mac book pro. Here's your macbook air done. And they were like but we have seventeen different snooze and he's great now we have four right and then there was the story of like member. Mobile me what a disaster shit show that this is great story re comes into mobile bay and he's like he comes into the meeting and he's like what what what is mobile is supposed to be. What is it supposed to do is like well. It's supposed to back everything up and when you get a new phone it's supposed to automatically put things there and he's like well why the fuck doesn't do that and the guys like He's like your fucking fire. Get out of the room. Who wants to run this and be like. It's kind of like the joker when he breaks the stick in half and he's like we got room for one more person on the crew. It's like sometimes you need you. Just throw the gauntlet down to get your shit together. People period in you know travis was that wartime. Ceo and the company could not be what it is without him period of story. You're in the ass marketplace idea. Ken the take rate be very little to prove a consumer bay behavior to get seed funding or is that a red flag take rate is what percentage you take from the transaction. Obviously in the case of the app store thirty percent in the case of an inquiry it's fifteen will in the door dashes something that fifteen percent range ending ten percent of the bring their free if they do their own driver. Fifteen percent of they provide the driver ten percents. I'm like that what's the right. Take rate in your mind. I mean i think it really depends Pronuncia in china the app Juan mon jeon to to green silent. i'm out obviously. Don't use it. But they basically went after alibaba with a super go. One dual no can do in new york. They went after alibaba. A worker what author. Massive them insanely huge. So that's interesting and so it really depends on the market dynamics so like if you have a market dynamic where the customers are clamoring for app and you have no competition than you know. A high tech grade is powerful. Because you can use that to fund the operations you know. If on the other hand you're a challenger brand new are going after incumbent that has a really high take rate and you can prove that by having a lower ticket you can grow faster than them some good strategy. I think it really depends on the dynamic. I think you're absolutely correct. You're going into a market and it really depends on what the marketplace dynamics are you come into a market where Let's say the app stores for taking thirty percent and you came up with an app store. That was five percent. My god if you were allowed to put that app store on phones you do great or a free one and you monetize it. Some other way Same thing with let's say And then there's times we just take too little to make it an interesting business. And example of that would be patriotic or other services or sub sack. They take ten percent plus three percent. It's just it's very hard to make that into a really big business. I think kickstarter also had the same problem so you have to be careful like you may need to have choose numbers in order to make any kind of meaningful money and If you look at youtube. I think it's one of the canonical examples. Take forty five percent of the gift fifty five percent. This seemed incredibly unfair to me. It's worked it's worked so and there's no challenger who said we're going to take twenty percent so until somebody has the hoot spa. That might be a good idea for somebody. Listening is creating a youtube competitor. That took twenty percent of the ad revenue gave eighty percent. You might actually get a be able to skim some cream there are. This has been amazing. Everybody follows back on the twitter z. A. c. h. c. o. e. l. i. Us that co leah. Sacco leah's amazing amazing world class early stage investor. He will give you time. He will give you money. He'll give it to you straight super candid. Thanks brother for doing this. I appreciate it. Thank you all right. We'll see you all time on this week and stars you've got to make this a regular ass jason and zack.

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SaaStr 433: What It Really Takes to Have Your Marketing Team Deliver Pipeline and Revenue with Latane Conant, CMO @ 6Sense

The Official SaaStr Podcast

27:30 min | 5 months ago

SaaStr 433: What It Really Takes to Have Your Marketing Team Deliver Pipeline and Revenue with Latane Conant, CMO @ 6Sense

"This is sastre founders favorite series where you can hear some of the best of the best from sastre speakers. This is where the cloud means is getting compliant with a sock to report. On your company's twenty twenty one roadmap vantaa automates the tedious and time consuming process of collecting evidence for an audit. So you can get focused on growing your business. On average vantage customers are sought to compliant in just two four weeks compared to three to five months without fanta learn more and redeem. Ah one thousand dollar off coupon at vantage dot com forward slash. Sastre off today what. It really takes to have your marketing team. Deliver pipeline and revenue with latin konate. Cmo at six cents. So i am the chief market officer here at six cents. And what i'm gonna do is actually just share my experience as well as ask you guys six questions along the way. So we'll keep a kind of interactive and fun and believe me we'll get to the pipeline revenue part. But it's going to be a little bit of a roundabout way. So bear with me so i have been at six cents about two and a half years now but it's been quite a journey and i learned a lot and i'm hoping i can impart some of that knowledge on to you and when i first got here i gotta say. I felt like a total fish out of water. Everyone's running around talking about all these different tech tools. What's in your stack intent data. Cd cdp this. That the other. And i was like i wanted. I take this job. I have no idea what's going on. And i had this huge inferiority complex and i remember sobbing my husband like what am i doing. I am shouldn't take this job. I need. I'm not going gonna do a good job. And he said babes. You gotta play to your strength. So i'm like drags. But i realized i actually do have a couple strikes and one of my strengths. I think is a strength. Because i spent seven some years working on customer experiences before six cents i was at a company called perio. And this was the opening slide to our pitch. It was forester study. Welcome to the age of the customer and time and time and time again proved out. I still love this study even those little. It proved out that companies really really invest in customer experience over time exceed their peers. That don't and there's lots of lots of different stats on that. And so i at my core. I believe this and this is one of the things that we did at a period was helped. People really transform their customer experiences. And so that's in my blood. And so i guess question number one for all of you guys out there is you know. Do you believe that. And if you wanna talk customer experience. Who's guru steve jobs. And steve jobs says you start with the customer experience and work your way backwards to the technology. Not the other way around. And i guess in the chat. You know who believes that. Who believes that true untrue. I know i do so. There's that the other strength that i have is. I actually while. I love marketing. And i love being a chief marketing officer here at six cents. I actually come from sales. I was gm. And i'm all about making money. I like to make. I like to make money for companies and so that's a strength of mine is really understanding the whole revenue cycle model. And so i want to ask you guys. What is the most efficient way to double revenue. And i've got two answers answer. A. is work more leads answer. B. is really really dive in and look at your conversions. Look at your cycle times. Look at your asp's in start to just improve those. What is the right answer and this is not a is not peewee soccer where everyone gets a trophy. There's one right answer. The right answer is b. Okay so with that context. I look at martine so i read i went back to my experience and i said let me let me let me put this other lands will be played in my strength and look at mark tech and then i had this other kind of wild realization. We kind of treat prospects. Who are actually future. customers right. Prospect is future customer. We actually treat them like dirt. Why why do we treat them like dirt. Why and what do i mean by that. Well let's talk. Let's think about when you go to buy either in your personal life or in your business life because in business we buy you know technology services all kinds of things. Do you want to do the first thing you wanna do either. Beat a b. or c. Would you wanna do you wanna research. Trae i don't wanna rock into my cfo's office and not have done my homework and not really understand why buying buying and and so what do we do. We prevent that research with the form. Let's talk about email. I don't know whether it's my personal email or my work email. I've had to declare bankruptcy twice because it's just so much it's so overwhelming we actually send three hundred billion emails day. There's only seven point seven billion people on the planet so a lot of these emails are spam and then let's talk about a cold call. I hate it when they spoof the area code of my kids school. Does that make your heart sing. 'cause you think oh my god. Something's happened with your kids. And then it's somebody trying to sell me something. I'm not even interested in that sucks. That sucks but that's kind of our game that's kind of what we do and so no wonder the more we do that as marketers and sellers the more buyers are retreating. They're saying i want to be more anonymous. I'm not filling out that form. 'cause i know i know what you're gonna do and there's so much conflicting information an app to get all these people involved to make a good decision so it's a buying team and then it's there's so much noise that they you know they're resistant. They don't wanna take the call they don't they. Don't wanna respond. so this is the way buyers. By their anonymous they're fragmented in their resistant and some of that is just because we treat them like dirt and so what happens is all of these calls emails an effort start to get lost in what we had. Six cents called the dark vinyl. Because it's all just this noise but with in that dark final. There's gold right guys. There's gold in their their signal. There's people that want back. But we can't see any of that to us non sir fragmented in their resistant and so as marketers and sellers. We have to work so hard. When i first started when we talked about an antiquated campaign it was eight to ten touches right now. Just the bdr cadence just that sales outbound motion. A typical cadence is fifteen to twenty two touches so more hours more content. More tech more calls were working so hard. Why for 'em else so we can get that form villa. We can get that we can demon. Mql and well as a recovering software sales person. I love club. And i love nice shoes. I'm telling you guys those. Mql's they're not getting us to club and they're not buying the shoes that we would all love to buy. So why are we working so hard for mql's when we know they're fraught with issues. Now what do i mean. Why do i think they're so fraught with issues. They're either too early or too late so too early. I just wanted the book. I really am not ready for your call. I just want the darn e book right. Or they're too late. Were so excited about that hot inbound right the they're hot inbounding requesting a demo with you. There wasn't a demo with everybody else. And your pride too late so that's a prob. The scoring tends to be arbitrary. How many of you guys have sat in the rooms with the post it notes and said oh pricing page twenty points baby. Excuse some points for that. There's this there's that the only people that one on those sessions was three hundred because we sold a lot of boasted notes and the other problem with the lead is it's a contact and we know that buyers by teams are buying group and so they're fraught with issues so had this like weird. Epiphany i said okay. I'm going to apply you know my lend my sales lens. And i'm an apply. This customer experience lens. There has to be a better way and there is actually because the reality is if you uncover your dark final and you start to look at qualified account all of a sudden a lot of interesting things open up because of qualified account looks at engagement across the buying team a qualified account. What we call the six. Qa looks at anonymous behavior and known behavior a qualified accountant or a six. Qa actually uses ai not arbitrary scoring to look for patterns and say this account is in this buying stage or this account is in that buying stage. So let's assume i give you the six. Qa okay and let me show you how this works. You have a limited engagement that dark funnel that i talked about before. There's gold in the dark funnel. There are accounts that are under rock. That means that they're not doing anything. We might not wanna waste a ton of money on. There's accounts that are starting to show signs of life. Gosh if you're a marketer wouldn't it be nice to know exactly which accounts are Ideal for you and are starting to show signs of life because that's who you wanna show your thought leadership to get them to get them to know your brand in consideration. These accounts are gobbling up content. They wanna learn. Wouldn't you want your content to be what they learn from and make sure it got served up their accounts in decision decision means they're open to engaging not with every vendor but maybe a few and then there's accounts that are actually taking meetings will in our typical mojo which i which i talked about were either to earlier too late when the sweet spot is when they're between learning and engaging and i want my team and i want your team to know and be able to time stamp exactly when that happens when accounts go from learning to wanting to engage in. Have you your company. Your sellers be the first people that they engage with. That's the sweet spot. That's the pocket. And so i love this. I'm all over this. This makes me so happy and one of the reasons it makes me. So happy is because i i worked for this guy chris heineken and he used to always show me the picture of these dogs and he'd say lattany. Here's the deal. If you're not that. I dog then. The view is all the same. And so that's what we want to do with the six. Qa is be able to make sure that our sellers are that lead dock and again it's anonymous known. It's a buying team. It's no emotion. it's a. I just math but you're free from. Mql's i'm we'll give you on. Break the chains on money. Give you all the six. Qa you're gonna know exactly where buyers are the best buyer spur you are in your buying cycle. And i'm gonna do that a little bit one up not only gonna tell you where they are. I'm gonna tell you all the activity they're doing. I'm gonna tell you exactly who on the buying team is the best persona for you and who is engaged and who's not engaged. I'm gonna tell you the key words that those personas care about and have researched. I'm gonna give you all that and remember our lenses experience. Ray we believe everyone said that raise their hand and said we believe that a great experience wins so if you have that what prospect or future customer experience do you create do you create one with forms do create one with spam or do you create one with cold calls. While i think and two years ago. I had this crazy epiphany and i said i don't think we need to do this. I think we can break the mold. And i think that we it's possible for us to create an experience with no forms no span and no cost and i marched in We were in person at this point. I was having a team meeting with milo marketing team. And i said guys with is going to be great. We're going to break the mold. We we're gonna use the six. Qa where he was all these insights that we have from our technology. And we're gonna. Totally reimagine are prospect experience. An luckily everyone on my team was so hungover that i think they just said okay. Fine crazy lady will do it. And that is what we spent about two years. It took less time to put in place. But that that's really what we've been working on to optimize our revenue and our pipeline. And i'm going to walk you through what that looks like and how that plays out for us. Here at six cents are process with no forms. No spam no cost. So first of all i have to define would form means because if you are gonna come to one of our events especially those in person. If you're gonna come to the dinner we need to know you're gonna come. We needed to know. What if you food allergy. So every now and then yes. We use a form. I sent a survey out for a cmo community that iran. They said i'm trying to get some information on screen so but what it means to know. Forms is all of our educational content. All of our product related content are demos. it's all we want you to learn from us and And that is our philosophy and the way that we put that in into play is to really zone in on this experiences is again because we know exactly where accounts are men. Brian covered the dark funnel. And i know there. These accounts in awareness. Six hundred fifty two. There's leasing consideration. There's these decision their season purchase. And i know when they six. Qa i can actually use my content and serve my content up at the right time to progress an account through this journey rate and we've always as marketers thought this way right we've always thought in terms of oh this is top of funnel content. This is bottom of fun home but while we do before we just did all out and sorta hoped that prospect would know where they are in the final right. Because i know i can serve that up at the right time to our prospects without forms. I also because. I know with accountability entity. I know who's on my website and i know where they are in the journey as soon as they come to the website. I'm in a welcome them. I'm gonna know where they are in the journey amir the content. They're most interested in. I'm not gonna need a form. And i'm going to be able to dynamically. Really moved them through and engage them based on the keywords. They care about based on their persona based on where they are in their journey. So it's going from a form to really this customer lead digital engagement. That's what we've been able to do. Now let's talk a little bit about spam. Does that mean did i go around and tell everybody. They couldn't send email. No people saw email addresses. We still send email. But we're not trying to personalise we're trying to be relevant and to me spam. It's not relevant. And so we're not gonna send an email unless we know the key word that prospect cares about we know the key persona and why that keyword matters to their persona and we know where they are in their in that bind journey so we can be highly relevant. We also are gonna of course. Use a mix of engagement tactics to really again. Focus on them and they're buying jobs and the things that they need to do. And so how does this kind of play out in real life is our beady when they when they rock in every single day. They used to come into an office now they don't get to unfortunately but when they come in to the proverbial office. They're not guessing. Who should i send a ton of emails to or who should i shoot. Cadences off to they know exactly what you counts are in market and how long they've been in market so that sweet spot they know okay. It's go time. there's something going on with. This account is the ideal time for me to reach out. They all so at and just knowing the timing again. That's not enough. I said that. I they also know the keywords that the account cares about they know what the account is researching we do. These things called value cards. That help actually connect if you're a sales leader and you're researching predictive analytics. You probably care about forecasting accuracy. If you're in marketing ops you might care about like lead scoring our account scoring so we connect the dots for them so they can be highly relevant. And then what happens. Do they email about anything. No they put right in. the subject. Line predicted this account cared about predictive analytics. We're going to put that in the subject line. That's what we're gonna talk about and boom. That's when you're going to get the engagement. That's when you're going to land on that relevance and of course again multi-channel using the key words refreshed multi persona. So he is looking at an account not a lead or contact awesome. So from spam to customer led engagement last but not least honestly. This was the most controversial for us to put into place because you know the head of sales with he was like i think that. Bdr's in the sales people we should be doing. Coblets is it's not that we don't do coblets his weird. I didn't take away anyone's phones like to me. No cole calls on which six cents the way we've really evolved. This definition is is to be. I don't want my account executives to have cold territories. I wanna make sure that every single seller here is put in an sodas marker head of sales put in the best position to win and again. This is about this. Class is about optimizing pipeline revenue and your sales team is one of your most expensive resources. And so what we want to make sure is that we understand accountant market and their wore. Those accounts are warm. And that's when our a s engage get involved and so what we've been able to do is accounts get alerted A east get alerted when their account when accounts ready when an account is ready to engage. But we found this really wasn't enough Because what we found what was happening was we. We're taking this experience. you know. A prospect driven approach marketing was engaging now we were warming a mob. We were getting accounts in market. But think about a sales team. A sales team has a list of accounts. And you know it's just the way sales gals and girls are are are wired. They're not going to go and work in account unless it's on their list and they know they're gonna get paid. It's just how it is so what was happening. Was we were getting all these great accounts and market because we knew they were. We had our. Icp fit and fifty percent so all of these accounts in the weren't getting worked. They're getting left on the floor and our eight years were working cold accounts and so he said well. This is crazy and we set up dynamic territories so he set up dynamic territories to make sure that yes our as have some vicks territories. But for the most part we want to be able to rotating rotate in the warmest accounts for them to work so they never have to make a coal call. So from co cost to this end. Market accounts and eighty selling with insights was a huge part of our journey bringing us back to the original kind of subject line of the class. Which was okay. let's talk about pipeline and revenue. And i saw this quote on linked dan. i don't know a couple months ago. Direct source revenue is the only metric that matters. This was directed at cmo's anonymous link. Dim bro a tree. I think that if you are measuring your impact as a marketer only based on direct source revenue. You're really selling yourself your team your ceo. I really the company very short. Because when i think about the impact of this what i've described which is putting prospects in their experience. First warming accounts up for sales. The impact is yes direct source revenue so here at six cents we source seventy to eighty percent of the revenue from the business. So yes we've also been able to double every single year with an industry leading caq. So it's easy to double if you've plenty of money we're doubling responsibly. Managing our cac which are customer acquisition cost. We have industry-leading churn and this last year with this approach we've had a fifty percent increase in win rates and a fifty percent in increased in our meeting pipeline conversion. So going back to that original question of do you just double eat or do you optimize. And so that's what i think about when i think about as as marketers really how how we build pipeline and ultimately revenue it's experience i focusing on the experience updating our experienced to really near the way buyers by buyers wanna buy and then it's about measuring ourselves based on that true full funnel of impact and really really locking in conversion so i am maniacal about conversions. My dashboard which i reflect. I refresh. I don't know twenty times. A day is always telling me. How are we doing with things like when rates every single little asp cycle time. Because i think that's ultimately what is most impactful for our business and so my last question is out here. We go sit in in a more than anything. What gets me like so wound up is probably at least once a quarter we get an email from someone who went through this cycle with us and they say they this once was to our c. Love it and they say hey one of the reasons. We bought a yes. You got a great product but we were so impressed with how focused on us we were. How engaging you you were how well your beady ours. We get people thanking our. Bdr's does that ever happen. You guys usually. You're getting restraining orders in complaints. We literally get people thanking us and saying how impress there they were with our process. The fun factor on the team. I measure every every other week we ask our team. How many days. How many work look at ten working days Out of the last ten working days. How many are you having fun. Eight eight out of ten. That's important to me is that our team is out there making customers successful living our brand and when i get emails like this it's it's pretty freaking cool so pipeline revenue yes but culture find get into really connect in a meaningful way with our audience. I think this is like the way of the future. And so i originally called this project when i kicked it off with my team and i said we're gonna do this no forms. No spam. no cole calls experiment. I called it project bold moves and so let's get bold. I'd love to have you in and if you're in we actually wrote kind of a how to guide on this. So we've published a book. July with really are playbook a lot more detailed than shared here and you can get a copy. We've got a certification coming out on it and we've got a book club in a box if you want to run a book club with your with your company. So who's in. That's the final question. Here fanta makes it easy to achieve and maintain sock to compliance automate your security monitoring with banta and get ready for a sock to audit in weeks instead of months learn more and redeem a one thousand dollar off coupon advantage dot com forward slash sastre. Again that's advantage dot com forward slash sad.

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Jason Citron - Building the Third Place - [Founders Field Guide, EP.4]

Invest Like the Best

1:02:19 hr | 10 months ago

Jason Citron - Building the Third Place - [Founders Field Guide, EP.4]

"This episode of Founders Feel God is brought to you by Microsoft for startups Microsoft for startups global program dedicated to helping enterprise ready to startups successfully scaled their companies. The program has been around for a couple of years, but I recently became intrigued when former invest like the best guest Jeff Ma took over. Microsoft for startups provides companies access to technology including azure cloud and get hub coupled with a streamlined path to selling alongside. Microsoft. In their global partner ecosystem Microsoft startup says it very compelling approach to working with startups and driving. Their long-term business value. If you're a founder running a B. Two B. Company targeting the enterprise, you should definitely check them out at startups, dot Microsoft. Dot, com to hear more about the program. Stay tuned at the end of the episode to hear from me and current program member abnormal security. 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Today's Jason's Citron the founder and CEO of discord discord is one of the largest and fastest growing social networks in the world it started as a place where gamers come to congregate online thanks to how easy it makes it to create a community of any type and it's offering of text audio video. As means of communication, it has expanded far beyond gaming. It has the potential to become the default digital third place that we go to find belonging in a variety of online communities with over one hundred, million active monthly users. It's also one of the most interesting social network businesses since the original social networks rose to power. Our conversation focuses on his background prior to discord discord founding and growth its business model, and how it has evolved over the past eight years and what the future holds for discord as we talked had the sense that I'd be willing to go work for Jason and I think you'll see why I hope you enjoy our wide ranging conversation. So Jason I was wondering how should begin this conversation I'm curious how you sort of made the leap from a video game player in to someone in the video game ecosystem as a creator I know he spent the first part of Your Career Building Games are as game developer before starting open faint in two, thousand, eight, I WANNA learn a little bit about what you learned or picked up at each of those first two stops before discords starting with the years as a game developer. What are the major lessons that you take away from that work? Well, I fell into that Valentine not even the right way to save I ran into it because just love playing video games the kid because of. That they offered and at my thirteenth birthday sleepover party. Everyone fell asleep and being another guy we're up and we were having a conversation. He was like I know how to make video games as just like no doubt there like this magical dark art no is this thing called computer programming I was like what we booted up my pending one computer at the time and fired up this nickel Q. Basic, which is very rudimentary programming environment and he showed me how to draw circles state I was just like holy crap half learn how to do this and I just became obsessed with learning how to program and make games in all through high school in College I just worked on side projects in Games. Screwed around making like tools for Internet and things that would make using Ailsa Messenger more fun, and then I became a developer working professionally in a video game industry was both thrilling and kind of disheartening it was thrilling because I got to work on video. Games was working on titles for playstation two, xbox, three, sixty era, which was really fun. But also like how the entertainment industry in video industry really works and the economics behind it working independent developers for a couple of years. It was tough to be in an environment where as a company you were really depended on this sorta like hit driven nature of the industry that was challenging and so I ended up. Basically going to studio that I was like I'm going to work in one place. I had three jobs in three years. So I changed studios pretty frequently because I was so frustrated with it, and the last place that I ended up was a fantastic experience funding. That's where I had an opportunity to kind of jump to the next part of my career will living with ten. Other people who are going to UC Berkeley I was about age of senior at the time. I graduated college really and one of the people who was living. There was talking to me about how his uncle was starting this kind of tech incubator. He was looking for people that want to start companies, and so I was like that's me. I've always wanted to start a company. My Dad was a small business owner. My grandfather was I always thought it'd be Kinda cool one day to have my own game studios and wanting to another ended up joining up with this Guy Peter and we were building ended up trying to build games on facebook and other social networks that helped bring people together when I learned really quickly from that is it's really hard. To make something that people want I went through probably four projects basically four different start-up ideas that aren't basically went nowhere the first one we literally shut it down the data. We launched it lose another one. We didn't even ship another one that got a little bit attraction, but couple months into working on that actually Steve Jobs announced the APP store and I was like holy crap. This is GonNa be huge and I thought back to my experience working in the medium industry looking at how the industry worked and what I realized was that whenever a new video game console generation comes to market every five to seven years in new videogame. Shifts like playstation and the playstation playstation three. Every time a new consoles ships is always a new set of games. There aren't that many, and if you can be a launch title, you're GonNa make money you're gonna be able to get distribution because there's not a lot of stuff to pick from. So people are more likely to choose your Thailand petition. So I thought that the launch of the APP store might be the launch of the new console and if we could get a game on the shelf, the day it launched, we'd have a really big shot at establishing ourselves in this new market if you can establish yourself in that gives you the to build your next time. You're next title, and maybe we could build an during game sissel saw that. So adult head into building game for iphone and back then it was like there was no technology there was no tools. You basically took apples off the shelf stuff if you wanted to make games like I was in there, trying to work some game engine that worked on Macintosh on. Anyway we ended up chipping a game on the APP store, the date launched, and we got thousands of in into kind of took off. So what I really learned from that was distribution is really important and you have to think about how you're gonNA cut through the noise and not only just build something that people want also get the word out. It's one of my favorite things that I hear from entrepreneurs over and over again, which is the recognition of a platform shift of some sort, and the fact that I always think about it like the literal westward expansion or frontier that if you're just the first, he just started get your pick of the land or out of the goods or whatever, but it's risky right? It's hard to identify them, and usually there's a lot of unknowns on certainty that you have to be comfortable with I'm curious what the leap was like from that early launch of a game to what became open faint, which I think of as like a tool kit for others that recognize the same thing early on that, they wanted to be building on this new platform. We lost this game kind of took off because there wasn't a lot of stuff to choose from. It was cool new experienced using accelerometer and stuff and what we discovered again or maybe that rediscovered that even if you get distribution building business can be difficult. So we got a lot of users, but the time our business model idea was to kind of do shareware harking back to the nineties is in early July phone there was no internet purchases you either makes think free or you could sell something. So my thought was, let's give the game away for free and then build A. Premium version that has multiplayer experiences in we basically built in eight dollar sequel that had all these really interesting multi-player dynamics where you could level up your character you could ask friends and then you could compete on leaderboards and then you could even compete in kind of ghost matches. It was pretty fun but no one was lying game three bucks. We launched the first winter after the APPS came out and it was clear at that point games we're going to be a dollar. Some developers were the system to basically do in purchases by selling coin packs that you could buy a separate apps. And we made. Thirty. Grand. On that game in very quickly realized it wasn't GonNa Fund. We were five people time. It wasn't going to be a business. We started thinking like what also begin to do ahead maybe three weeks runway left in the bank we were sitting around trying to think about what to do and I remember calling my dad. and talking to him and just basically telling him I think I might be moving home soon because I think this whole startup, it's GonNa. Come to an end for me in a couple of weeks. Gambling is it working? We don't have any more money not going to. Get, my room ready. Turns out. We had this idea to take all of this a synchronous social stuff that we built inside of our game and turn into toolkit further develop pursues and the idea came from looking at the ecosystem on mobile and looking at the ecosystem in consoles PC. I realized that xbox live style services should exist on old vices and they didn't time. We had basically built them inside of this game in. So we had the ideal what if we effectively launched the Xbox live fraud phone? I bet that developers would WANNA? leaderboards and ghosts play and all this stuff to their games. But. We didn't have actually enough money to fund really taking the technology out of the game and turning into a standalone project. So this is another really interesting lesson I learned about validating hypotheses. We put together a landing page at open dot com and it basically said xbox live for Iphone leaderboards chat multiplayer game no servers required sign up to get access to the Beta I made fake screen shots in Photoshop or what the system look like. And we convinced tech crunch to cover it. We got like a couple hundred developers to sign up, and we took that mailing list an raised a bridge round financing than gave us enough time to go and actually build an MVP of the service for recruit the first ten developers and we launched it three or four months later with fifteen games, and we we managed to get one of the big indie titles time. To, really cool to integrate just Kinda. Start to take offs in two years. Later, at one hundred employees, they were like seven thousand games in service and we we sold it for decent Chonkin. I really learned how to go from being an engineer to being in that experience. Of Love that story and I love the cell build ship ordering versus bill sell ship. I think that's a common trait amongst good entrepreneurs but it's all sequencing and timing you sort of have to work your butt off to make it possible. What was the transition like from that sale of that business into the kind of early prime real? WHO's of idea around discord? How did you move from the lessons you learned at open faint into the first iteration of discord it. Was Not a straight line. These things always seem neat clean from the outside, but they're often not after I sold my company threshold faint I thought that I was going to stay on and really build a bigger thing I really wanted to help people spend more time together in have these amazing experiences around video games because so many the best memories of my life have been. Around playing games in those moments of playing games the so I really wanted to keep doing that and turned out grit. That's just not what was in store for me of we Kinda didn't see eye to eye with the company acquired. Awesome. Actually asked me to step aside so that they could run the business way they saw fit and I felt like actually the best thing to do would be to leave I left actually after maybe three or four months and I sat in my car and cried for about fifteen twenty minutes when apple's because. I thought I had failed I had poured my heart into building this and it's so hard to build something that gets that kind of scale that I kind of thought that that was my shot and I messed it up which strange financially, it was a pretty decent outcome but emotionally, it was very tangled moments for me and so I ended up taking a couple of months and just kind of relaxing taking a deep breath re-centering myself I'm spending time with my girlfriend down my wife's playing video games one thing led to another in six months left. I was working on concept and just thought to myself. You know what? Let me try again. Twenty six time I'm not done. Let me try. Let me start unaccompanied. What zeroed zero on was this was in two thousand, twelve and IPAD was relatively new platform and had been growing for the first couple of years in what was looking like it was going to become another hockey stick. I thought that perhaps the kinds of long form cooperative multiplayer games that I love playing on P. C. would become popular on tablets because I thought that you'd be sitting in a place. For were extended period of time in that tablets report sessile than PC's so games like world of warcraft League of legends, counterstrike would become popular unease devices. So I thought there aren't any of these games really at this point in time why don't I start a company to build really amazing deep immersive, cooperative multiplayer games on tablets. So that was the original thought. My idea was that if this is true then. There's also going to be an opportunity to build a communication service for groups of Gamers that is mobile focused and possibly more of the ecosystem that exists PC will shift to mobile. So the Vision for this company when I started in two thousand twelve was build a competitive multiplayer game with team dynamics to bootstrap a group communication service, and then once we mass. Bill Business by distributing games on top of making are Oh that was the plan because I thought get to pursue my passions of helping people spend time together around. Games I. GET TO MAKE Games. Having spent so much time in the industry I understood that it was difficult to build a hit. You have to have something durable and what's durable about entertainment is the need for more of it whereas most entertainment content have novelty in sort of people move on from them although that's starting to shift over the last decade now with his service, but at the time I thought. If, we could have a distribution mechanism for games. The need for more games never goes away. That could be the durable core of the business and I thought what better way to have a durable core of distribution services having communication poplin that. So it was sort of interesting confluence of all of the things I had seen in my life at that point of what I thought. Needed to come together to build an enduring important company that could help bring people together out games it turns out. That's kind of what we built sort of if you squint were there early examples in discord of the hypothesis testing mindset that you described a few minutes ago with fake Photoshop images how did you apply if you did that same idea at discord I mean a bazillion time. Honestly, it's just how I approach product development now is treated almost like science. You Express Art through the framework of the scientific process, which is like you have my policies you come up. With. The minimum amount of thing you can do to actually get real signal back on that I've offices you take the learnings from that in a new plight to the next one, and you just run that flywheel. The biggest mistakes that I've made building. This company had been where we went too long before getting signal back it was a hypothesis destruction where it was just too hard to get signal back without doing audit work and I'll give you some examples. So when we started in two thousand twelve, the idea was, let's network by building a game and so we spent. Six. Months doodling around game ideas basically prototyping, using the same framework of like wouldn't it be kind of cool if Howard offensive popular. So like what would a clock tower defense game possibly be like very quickly iterative building that with just ray blocks in cylinders to kind of get the experience together had a couple of ideas like that didn't end up creating enough conviction around them though perhaps not due to getting enough signal, and so then we decided to bring one of the more popular. Titles Chonreznick on PC kind of do a platform court. You see this happen a lot where there's a game that will exist genre that exists on a platform and when a new platform emerges, there's interpretation of that. John NRA. That ends up becoming really popular because I think the game design to actually code a reflection of the way human brains work. There aren't that many new genres because it's hard to discover new fundamental sort of gizmos gimmicks that really enthralled people but they happen from time. I. Thought One way to do risk could be by taking something in interpreting it. So we decided to riff on the mobile concept, which is sort of multiplayer online battle arena concept where it's realistic. Don't play video games. You basically have a team of people three to five people playing against another team five people, and it's conceptually like soccer except there's dragons in fireballs and wizards and stuff like that, and so we built a three version of that game on tablets and we spent about a year and a half on it, but we tried to chunk it in ways that we could de risk the product by getting signal. Back earlier. So one example is test starts style. We actually did concert and put it up on read it and said Hey. We're studio making a mobile like what do you think of this this art style and we tried it with actually a couple of different things in. We got some great feedback that caused us to iterating on the art style. Ultimately, what we ended up with was much better because of that early signal that we got, we did something similar with the game play mechanics where we were testing out different ways it control games can work and different sort of ways at the map could be designed sort of. Sin We got a lot of good early feedback on with the right mix could be that ended up guiding us to launching the game that we launched, which was called fates forever in two thousand fourteen unfortunately though even though we got lots of good signal on away. Ultimately wasn't a hit because I think we picked the wrong platform who picked IPAD and I also think we were a little bit early today. If you look around people are playing these kinds of games on their smartphones constantly, and so I think this was a situation where as it entrepreneur I had perhaps the right hunch about where the market was going, but I mistimed platform and also the timing of the whole thing. What did you learn about the right amount of signal reference at a few times like it almost sounds like the key in all of this is I have to have the mentality, but then second, you need to know what signal is real and strong enough to build upon any broad ideas maybe from. Or for mistakes at signal interpretation when you're running these experiments, one caveat I will just start with is that I have yet to make a hit game using using this approach. So take that for what it's worth with this approach has done is I think the games that I built have been modest successes but I think trevor would have been a modest success but I was looking to build something massive scale and I just knew it wasn't going to get there. So maybe the learning from that is that if you're trying To build something that's GonNa be at scale frequency of usage and jeopardy usage of a product in the early days needs to be astronomically high because as you get to scale, you're GONNA. Get people that are slightly less and less interested. The most passionate people about what you're building are going to be the ones that find you in the early days when you're looking at the sort of behavior of people using your service the early days the people need to be rapidly obsessed with it and this was true with open faint. With our game. This was true with discord when I think about early retention. Metrics Timespan and these kind of things that are good indicators of the objective utility of which are building the amount of time. That people were spending using discord in the early days was just totally ridiculous because people really really really liked it whereas when you look at our game, even in the context of what great teams should look like it just wasn't there and we could have realized that earlier in probably hit it harder to something else. What was that early intense usage of discord? What was the original early adopter use case in what are the product look like at that point? The idea was really about building a better version of the tools that me and my co-founder stand had used when we were playing those games on the Internet using battle net, and early in the most the communication tools that existed actually hadn't changed that much from when we were teenagers to them, and that was probably fifteen years or so two thousand to two, thousand, fifteen when we were starting discord, the tools headingley changed that much. So Stan my co-founder actually as a really story to where he was also sort of like me passionately obsessed playing multiplayer games in his particular story was around falling in love with frontal. Fantasy Eleven, which was the version of that game and really using it as a way to find connection and friendship because of where he lives and sort of how his friends were spread around La you try building a bunch of tools to improve that service in ended up joining up with me to build our game. We were thinking about, what do we do next because the idea was to take the game to bootstrap network and we don't have a game with a lot of users like how do you truck network and Stan actually had a really interesting insight which was that perhaps instead of bootstrapping networks through the game. On mobile if we actually started with P C, where people were already playing competitive player games a lot cleaning us. That we could build a better version of the APPS that people were using then and then be ready when the wave took off on mobile for the next billion people. So the original idea that he actually pitched me for discord was, let's build came speak meets skype with a modern twist that works great across desktop mobile for people who play games like fantasy world of warcraft. and. What literally did it feel like I'm thinking about like the computer screen right now five got some game up on the screen is discord on in the background is it also on my screen? I'm just curious how you shoehorned communication and the different styles of it into the activity that it was surrounding. We didn't shoehorn anything. It fits snugly license gracefully even better even better. Yeah. This is an APP that you would download on your computer in the early days was mostly people on Windows who were playing cooperative competitive multiplayer games and you download the APP on your computer. You create what we call the server, which is kind of a group where you can invite your friends. It's an invite only space that lets you text chat and voice chat at the time. So you could have the server setup for your killed ten or twenty people who you were playing. And when you turn on your computer, 'cause you WanNa, go play dischord will be there and you can see if your friends are there. So wait would work as people would click on what we call voice channel You could name them whatever you want. So you could call the lounge at one CACTUS card and right now you can click on that and it would show that you're in voice chat and Then other people in your server could see that you run voice chat and Click and show up there with you. So it was kind of always on conference call experience this concept. So we didn't actually invent it. They were advocate came before us speak at bumble and early going back to the first one I think was called Roger. Willcox that had this kind of voice communication feature and it was popular. Really popular with a small group of people that played MNO's online, and our thought was like this is the best way to talk while you're gaming. So let's make it really easy really accessible. You could hop into that voice channel and then open up your video game in the video game would be your full screen, but your friends were in your headphones and then because you're playing in a virtual state, your friends, you also see their characters and it created this really amazing experience that made it really easy. So more people were able to do it. And then because it worked on your phone, you could also see if your friends were invoice and talk to them when you weren't at your computer, so you could coordinate between games. I read somewhere about the sort of early days of growing this concept. I always love out businesses are distributed in the early days and how the word spreads. I'd love to hear a bit about how you use existing networks of people that you cared about to reach them whether that's or subsets specific games. What did you learn about distribution and getting the word out about discord once you knew you had something that was popular or was it mostly just word of mouth? It was both but word of mouth start slowly when there's no mouths to have words, you need people to be excited to share it to generate momentum. So I had learned in my early experiences a distribution is really really important in one of the insights that we had was that. People were not gonNA download another voice chat out, and at the time there were other companies trying to innovate in the space game box was one voice was another. They were a couple of the other ones but there was a reason why really one of them was most popular it's because the way that they would work is you have to download APP on your computer and then to join with a group of people, send you an IP address for those who don't know it's basically I think it's twelve numbers basically type in a password in order to join in and you have to pay for it. So it was pretty hard to use the stuff and if someone was using teams. Speak in you had mumble and you want her to go on a raid with them in the game sometimes, you just wouldn't do it because he didn't want to down in salt or APPS. So we knew that it had to be really easy to get people in. This is another one timing things that were just sort of lucky but into thousand fifteen, it was the staying I'm GonNa, technical for second but there's this thing called Web RTC that was becoming part of the new web browser standard html five and just the year before it had shift in in the web browser chrome and it was shipping fire Fox just a couple of months active you're playing launch will stand had the idea of. Louis could solve this friction issue is by. Using web RTC building the APP in web technology frameworks we could make the whole application run inside of a web browser so that you could join it by sending someone a link you don't have to install anything. And then if you really like the APP in the browser, which is just thoroughly a website, you could download it to your computer, and then we had essentially a customized web browser that looked like an APP. That had extra features because we were able to run native your computer, and so having it work in the web browser was a fundamental part of the experience of getting people to even try it. So the way we ended up being people to try it was I were like, Hey, friends go check this after renew a lot of people who play games like this and Our friends were pretty excited about it. It took them a couple of months actually switch to use it, which is a different story, but they were cited about it but once we got them to really use it just through friends. We probably had no twenty daily active users, twenty people maybe using it to actually get the word out and grow at scale. We basically went to where people who play games hung out and congregated in the initial growth hack. If you. WanNa call it was read it where we got one of our friends to post in the final fantasy fourteen Fantasy fourteen was the other that they made and there was a new expansion coming out at the time, and so we thought why don't we focus on this game which can have a new expansion coming out when new expansion comes out there's new content new reason to play. So we thought let's focus there. He knew that blatantly advertising people was probably not gonNA work. So we thought why don't we just ask people what they think about this maybe they'll tell us that they like it maybe they'll give us feedback make it better but that's the approach we took, and so we ask our friend to just make a post. Like asking people what they think about it. So he posted hey, everyone as anyone tried this new voice over Ip call discord. And in the retina posts, actually we went in and responded like, Hey, where the devs here's a link, here's a url to a server that we set up come and talk to us. If you WANNA learn more, this is another thing with the link. So we were basically basically sitting in a discord server, which is what we call the groups and people were finding the thread on reddit clicking the link because they'd have to install anything they'd open the website come into the APP. See us in those voice channels click jumped in and then be talking voice chat to us to the dogs and they thought it was the coolest thing they go back to the reddit thread comment I just clicked the wink was talking to them that seems really cool. Check it out. Try It. We ended up getting a couple of hundred people register that day, and that was kind of the first kicking the snowball, the mountain kind of thing that helped us start to generate or. I love that story I. Love How it's progressed from there discord. Now, a lot of people have used some version of discord whether it's slack or discord quarter teams or something else we're discord has very distinct feel to it and feels like just a place to go to be with people that you wanna be with in a digital sense and there's that famous story about like starbucks and the inside being that it sort of this other place of. Your home and your work that you go to hang out and it seems like discord more than any that I can tell from using the products has that third place tight feel to it and even beyond games obviously, we'll talk about that in a minute but I'm curious how much of that was intentional like as you thought, okay, we got the initial traction I know you said the early engagement was off the charts. High people were using a ton. How did you think about products late from there what has been your product philosophy for how to grow the platform and was this third place idea intentional. The third place idea it's funny question ask if it's intentional because it was intentional. We didn't know that we were making a third place. We were intentionally trying to create the experience of a communication service that like your friends were around. Where you could interact with them without having a lot of friction and do it in ways that Phelps playful and had low commitment. And it turns out those are actually the attributes of a third place. We were doing it because we thought that those were the things that we wanted to has as a Gamer in our communications service and it was only four years later in two thousand and nineteen. When we started really realizing that people were using discord were so much more than just playing games with their friends that I. Actually. Did Research on this concept of the third place and I read the book the great good place by Rail Limburg which was written in the eighties where he actually talks about this and starts to put labels in words to describe the concepts of how these third-place work and as I was reading the book I was just like holy crap this is what we built accepted digital. It's this. Incredible Q. Say a bit about how you're thinking has evolved on who your audience is. So I mean it's incredibly clear early on very often I think companies fail because they don't know who their actual customers and you clearly knew it was yourself and it was built sort of versions of it. Before you knew the community, you knew how to attack it. I think what's so cool about discord. Is that my engagement with it was not for gaming when I first tried it it was for a separate type of community and I think there's all sorts of communities. Now that exist on discord how do you think about that from a philosophical standpoint about starting with a very, very specific audience and core and sort of having more pulled out of you by other types of communities beyond gaming. I think it's wonderful and fascinating. The journey has been really interesting because you start building a company in focusing on a customer set of problems. A lot of that comes from personal connection. It wouldn't founder. Does it truly authentically I? Think like I did have normally interested in video games when they played a big role in my life when we started realizing how people are using. Discord for other things, we started having a lot of conversations around what should we do about it it's cool. Definitely it's great that our work is helping other people find belonging and spend time together. It's not within our mission. Our mission was to bring people together around Games. What does that mean? If we want to acknowledge this and we did a bunch of research to figure out Really how big the phenomenon was and when we look in two thousand nineteen, we ran a survey in self reported that actually not thirty percent it was thirty percent of the people who took our survey self reported that they did not primarily use dischord for gaming. Clearly, we have to engage this because it's not like two percent. It's a lot of people we started having some really. Deep conversations around what are we trying to do in the world? What is our mission really about what we really care about an standing night did this exercise where we both kind of went into separate rooms and starting with our mission bringing people together on Games? We did the five wives exercise I have heard this, but it's a great technique for doing root cause analysis kind of. You just ask why and then you write down the answer and then you ask why that and you write down the answer and you ask why of that you do it five times and why about the fifth time you start to get at fundamental truths that Radyr backup to what you're doing. Standard both did it and then we shared her answers with each other and what was fascinating was the fourth or fifth why we both said? To find belonging in the world or something to the effect of belonging, and that we both realized that bringing people together around games for us was about belonging and connection with humanity in a deep. Social need and the more we sat on this thought about it we realized how profound this was Maslow's hierarchy belonging I think is the third one started to become clear as the started talking to more users and listening to them about what they're doing with this. Gordon how it's about talking in its place and it's about friendship we realized that actually people are just using. This tool that we built to actually help us cultivate belonging in the context of games you're using it to cultivate long in the context of all sorts of shared experiences and activities, and that actually we could just go more fundamental with our mission expand the aperture to what we're doing to be valuable to literally everybody we sort of rewrote our mission as giving people the power. To create belong in their lives, and now that we actually imagine a world where everyone has the ability to belong in a more easier way than they could before because they can using these amazing communications services that we have in our pocket powered by the Internet can keep in touch with friends that may have moved across the country or across the world or you can't hang. Out with your friends on an evening because whatever reason you can hop on your phone or hop online and there there you can talk to them in pop in and pop out and how this experience of running into your friends almost like have your own private cafe or shopping mall or living room but it's online it's in your pocket and we think that it's just amazing. I love it, and I love it makes me just think of and. Listening to be too young to remember AOL instant. Messenger. But just the Internet has been a place where oftentimes you're not there together and the cool thing about him was you'd see that color dot whatever it was and see someone was there and it was like this cool opportunity to just jump in and start talking and it seems like that is belonging in many ways and that's what you've built. Really curious how The business itself has evolved. So people familiar with business models like say slack and other communications like these how do you think or think about or describe discords business model and how much time cumulatively as part of the pie do you spend thinking about that part of things versus say like the product might thing was offers it just seems like there's always so many different choices for how to build the model and. How to charge people I'm just curious what your deliberations were and how that lined up with product thinking. Originally, our plan was to sell video games, the people, and we actually tried to do that. We launched it video game store on E. C. at the end of two, thousand eighteen with that a dozen games and very quickly. What we learned was that people actually just wanted us to build a better communication service. And this was kind of one of the first pieces of signal that we got that. Maybe we were actually over emphasizing video games in our mental model in our audience was in addition to competitive that the market at the time which ended up being rather sleepy for awhile got very, very competitive fast. I think the other big companies saw similar created we did. So while we had a large audience, we actually were not. Capitalized in a way to fight a real content war with Microsoft and epic who makes fortnight it was there was going to become a battle of who can throw the most money at game developers to get exclusive content and as a startup that had scale that didn't seem like a prudent thing to be doing. So we very quickly actually backed out of the Games business and kind of pivot away from it. And then double down on communication services. We had launched this service called discord nitro in two thousand seventeen as a way for users to basically support US gets them chat brooks and it was like a five dollars description service and it was modestly successful as covering I. Think about a third of our burn rate in early two, thousand nineteen when we were moving away from the game store end, we were debating whether we should double down on that the concept of selling ads came up again, we've talked about selling out before it came up because it's a way that other companies have been successful in sort of social media space. But I really didn't sell ads because I felt like selling ads would require us to spend a tremendous amount of energy investing in building. This ad technology that actually doesn't make the end user experience directly better. It actually subtraction the end user experience. So it'd be spending ton of energy taking value away from our users so that we could make money and really wanted to build. A business that the incentives of our team and our user base for directly align our users raw customers. That was why we watch the game store and that's why in that moment I said, let's do the easy thing and just slap ads us. Let's double down on Dischord Nitro, which is all about making it more fun to talk and hang out and see if we can build a real business around that. So we spent a lot of two thousand and nineteen probably about a third of our time. In terms of sort of product had space maybe even closer to a half really trying to figure out how do we make discord nitro more exciting and more valuable to people so that or people would pay for it because sort of early support, molly called it. A donation wasn't super-popular even though it was making a little bit of money. So we doubled now that and we launched a number of features including boosting, which is basically like a way for you to give back to your server to your community by spending some money that. makes. You feel good makes everyone else feel good lovely human dynamic happens there and that just took off and as we've added more features to Nitro people have just continued to buy it and now it's a tremendous business that's growing incredibly fast and we haven't shared the revenue numbers of that but it's clear that we can now build a really massive business by making it more fun to talk in a way that doesn't take away from the free experience either which is an important part of what we offer. So everyone can access hang out. I really want to double click on what you've learned so far there because I think history of businesses that get a ton of people like you have is that they become advertising businesses and some of those are incredible businesses, but it is sort of the natural tendency. My friend goes by the student. A modest proposal on twitter says long enough time scale everyone sells ads and I love this idea that you've of flipped it and said, let's take what makes people love US and try to make the experience better and premium instead, what are those enhancements, the literal examples or the kind of frameworks for how you think about enhancing communication through Nitro? The most popular teacher is actually what we call custom animated Emoji. So people love Emoji you can text cat people love text chatting, and the fact that you can insert visual expressions of what you're thinking whether it's a face or a pizza slice or rocket helps you add in express the color and flavor to your which express undescored we have a feature where each group of people each server can set up their own custom Emoji that they can use to allow themselves to express things in a more fun in sort of personalized way and people loved that customer feature that is. What we charge for if you WANNA use those custom emojis in your direct messages. So in your one on one conversations or in other groups that you're with like he's GonNa take them with you. That's a premium feature, and then if you want also allow them to animate that requires you to pay. We took sort of basic emoji feature we added one level of persons to. Which is free and then sort of next level is where we put the paywall. So we try to make sure that the things that are premium on board are exciting and fun but don't feel necessarily because we want people to really feel left out we wanted to be still fun to hang out and talk. So that's one. Another example is we have a feature on dischord. Called go live where you can basically stream video games to your friends and it recreates the experience of sitting next to a friend on the couch watching him play a game but a mind. So it's ultra low latency and it works great with ten people although it's up to fifty you can watch your Prince Games for free you can do it at seven twenty p thirty. FBI. BS, and if you pay, you can do any sixty F. B. or all the way to source. So you can get older high quality for your friends to watch. So really cool but not necessary but a lot of people like it and then boosting is another one that you have to pay that we charged for. So goosing is you can choose to boost the server. Depending on how many times server gets boosted a unlocks a different set of perks for that server which ranged from more customers to the ability to have a banner. Space Field little more personalized to animated icon or splash screen when new people join and so people can contribute consort of pitching together, unlock those perks for their community and people love doing that and you get a little badge next to your name shows your poster. So kind of stuff like that. When you talk about, it doesn't sound like it's necessarily that profound but I think the reality is that it feels profound when you use those things because they're really delightful and people love it. You have the history of humanity. You said earlier the five. Wise. If you just think about how people act, it's sort of the same as buying certain types of close people like to express themselves and have something unique about themselves to show other people and people spend more time on line. So it makes perfect sense that they would want to do the. Same thing in a digital context, I'm curious how talking about company building here. So you mentioned earlier leaving the the acquirer of open faint not seeing eye to eye thinking very carefully about what you want discord obviously the product, but also the company to be having now overseen I. Don't Know How many employees you have raised a few hundred, million dollars. There's. A ton of our D that's gone into that love to know kind of how you think about and D. as well. But what are the big principles that you have for company building specifically at discord? The first one is to be intentional. My last company I wasn't really what I was doing. I was twenty, three, twenty four never really managed people before let alone run a company and somehow had fifty eight hundred employees and I, remember there was a moment around eighty. Seventy people one of the early employees again, Mandy dill good friend of mine quality and actually works with us. Now at discord he came to me and he said Jason it sucks to work with open fame. It's such working here. I was like Oh crap. That's not great, but I'm not going anywhere but I'm saying a way. Okay. Great and we started trying to fix it but we ended up in the company and it's hard to fix culture when you haven't been intentional about it and you have a hundred people. So when I started discord Andy joined within a couple of months and so we were around maybe six people or so it was three people that, December, he and I and Brandon who is another person was with us we were sitting. Around and we were talking about the kind of company we wanted to build and how we've got to be really intentional about the environment that we create. Because if we're not than, it's just going to be by accident and it's going to have is just not necessarily going to be the kind of place that we want for the kind of role they wanna live in having myself also worked in environments earlier in my career that as an individual contributor, I found very frustrating due to the nature of. Konczal stuff I really wanted to go a little bit slower this time building this company and be more deliberate about it. So we did and a lot of the sort of intention -ality resulted in a couple of early values I have read about. But essentially what it boils down to is as you add more people everything harder because you have to communicate more and it's like an N. squared problem because it's a network. So one of the original insights that I had which to stay holds true is if you can hire slower. Everything is easier. We had this sort of company that small mighty teens. which is this notion you can get a lot of stuff done with really really really smart people that make high quality decisions that compound. If you choose the right technologies in the past to building and realizing your vision, it means you'll have to communicate as much evenings loves management overhead less coordination issues in his largely worked for us anywhere around two hundred eighty people now and given that we have over one hundred million. Monthly users I think are like employees to user base scale is quite unusual for this kind of service. Another one is I really wanted to create an environment where people came because they were in love with the change we're trying to create in the world and so early on we instituted this concept of what I call mission fit when looking to hire people. So we really screened for people who cared about our mission in nearly as that was adopting together out games, and now it's about giving people the power to creep in their life, and so we look for people who have had experiences that allow them to personally connect with the products that we're building. In a change we're making and when people really care about the purpose of your mission, they just naturally care more about everything about the details they work a little bit harder. They pay attention to the details. They don't let the garbage on the floor sit in picks it up, go get it because they wanna make sure that everything is great. So people try a little harder when they really care about what changes Harnett create third is creating an environment that fosters intrinsic motivation. The really wanted people to feel motivated and purpose is part of it and actually there's this guy, the pink who wrote this book called drive which I discovered pen of after thinking about this. In helped me sort of codify these ideas more. But there is some science behind this notion of how you create intrinsic motivation and it goes down to basically three things autonomy mastery and purpose, which is the mission fitting I talked about naiad compassion to it because I think it's important that we acknowledge that real humans. So I wanted to create environment where people felt relatively autonomous were treated like adults they could learn and grow and be challenged cared about rebuilding and felt supported by the people around them, and then the phone, which is the last one is taking a long-term view. So I say it's a marathon. Not, a sprint building enduring companies and creating change in the world is a result of compounding value over time, which takes time having ten twenty year view on what we're doing allows us to make decisions that can result in incredible yields in the future that may not seem necessarily the best in the short term it causes you do things like invest in management training. We did this thing early on route twenty people that we went from just me and twenty people to like okay. Now we need managers Accu was me and my co-founder stand and are early Cmo Aeros, and we now we need middle layer of managers. Instead of just continuing to hire. We actually froze hiring for three months created a management training program asked who wanted to be manager. Those people took the program, and then we restarted hiring and I'll tell you are silicon valley vs they thought we were crazy for not hiring people for three months. But I knew it was the right thing to do. So to this day, we spent a tremendous amount of time on training and learning in development because investing in your people while in a month may not have great returns in two three or four years have credible returns, and if you come back to the notion of smaller mighty teams, had you get more done you either make your people more productive by giving them better tools or you make them smarter? Those are two big things that we do so. Long winded answer. But that's kind of my philosophy for hiking about a workplace knock on wood so far so good. You're obviously very team focused very product focus. I'm curious given the scale you've now achieved in this is with me with my investor had on how often you think about competitive advantage around discord the business I mean obviously, you've got the most prized thing on your side, which is a network effect communications companies tend to have that it's hard to get where you've gotten and and that sort of its own best defense. But you think beyond that intentionally about competitive advantage as a business. Definitely, I, think if you're trying to build a business scale, you have to think about competition no business exists in a vacuum I think it's important to pay attention to competition to think about. Where your weaknesses might be where your strengths might be where you need to shore up defense where you can go on fouts which core is all of these things but I don't think you want to focus too much on competition because this is sort of weird analogy because I don't really play sports but I just sort of remember this thing that learning this when I was a kid like when you're throwing a baseball, you need to look where you WanNa throw the ball. And if you look somewhere else, you're not GonNa get the ball where you want it to go and I've heard this off soon the concept of driving go look at the wall look at the road you're GonNa go where you're looking. Human behavior that you will go where you focus. So if you focus on your competition, you just end up copying them chasing things instead of focusing on customers and their needs at going where they want you to go. So we spend a tremendous amount of time mostly focusing on fundamental human needs. What are people doing what our service heck we better serve them. I love the idea that discord is almost like a bundle of communications because you're able to do text and video and voice, and all these different things. How does the usage shakedown I feel like you're a petri dish for how people like to communicate digitally because they have every option? What is the breakdown of those methods in how often people use each? Well, I think what's important actually kind of take a step back to that third place concepts and really talk about the holistic experience because what really makes this scored? Magical is the particular concoction of what happens when you put all these things together. You have an invite only space with just the people you want to be there. You can organize your communication channels, which prompts people talk in certain places in helps keeps multiple conversations going. So you can have different people gather. We have this thing called permissions enrolls, which allows you to set the rules norms for your space, which in real life is such a fundamental part of how people gather you have hosts and you have regulars and you have entry areas and you have people sitting in you sort of have waste Organiz people. The fact that we allow you to have roles organized people, and then actually have power to have the conversation areas or to kick people out really gives you the feeling of having a space with people that can invite you in and that you have to behave, and then the way that sort of the live features work like presence and voice video makes it feel like people are around. So because you got the green dot are you can see if someone's playing a game or listening to music or if they're on voice chat with two other people, it gives you this sort of I. Call it the busy restaurant phenomenon you look at a restaurant and it's full of people. You'll like that place is cool. It's fun. It's alive. You look at a restaurant it's empty like a that's not so exciting just for service feel like busy restaurant because it's full of people who you know if you don't know them that you want to talk to and so at least three things have like invite only space where easy to hang out in control the rules and norms really Chris this experience of having place that you can go now to answer your question critically when is happening is that people use text voice video kind of evenly split because depending on the amount of focus and attention and intensity you WanNa have in that moment, you can pick a different tool. So chat sort of lower energy lower attention required to be in a text conversation voices. The next level in video takes your whole being it turns out Texas voice about even in video is kind of an up and comer. We just launched video chat actually after the virus that happened mostly because from the context of gaming video chat wasn't that important. But when we started thinking about moving beyond gaming video chat became very it. So we added. You mentioned earlier this idea of. Slow -I and begs a couple of questions on people and hiring everyone always asked what do you look for in somebody bill ask the opposite question, which is when you're interviewing somebody what bothers you the most? Two things come to mind. ONE IS PEOPLE WHO Are Not Humble. You GotTa be humble because if you're not humble I think it's too easy to sort of drink your own kool aid and get carried away with things you have to be curious and open minded and I think being humble is an important part of that. But like a random pet peeve in all-share it, maybe we'll give away part of our interview process Detroit, but I think it's really really great to watch for it to see if people are passionate which. Is, our interview processes. We take a buffet lunch. We have three people who are not part of the rest of the interview loop go out to lunch with the person and we watch for how they treat the waiters and if they don't respect the waiters eye contact polite than we assume that they don't respect people who don't have power over them, we want people who are going to be kind and polite and compassionate when they don't have to be our culture is all about. So we're looking for people that are warm and wanting enjoy being around that. But so that's like a little kind of human behavior that we look for obviously now that we don't take people out to lunch because of the coronavirus, it's harder to check for that interview. So we look for more around when they have our quote ritual lunch, are they speaking to each person? Are they focusing on men more than women, these kinds of behaviors to try and get a sense for are they just like a kind warm person? Are they ignoring junior people talking to? The senior people conflict when people do those kinds of things like we've rejected senior couple of EP candidates because stuff like that. It's a hard line for us. I've so loved the story your story is so specifically unique and interesting. Maybe I'm biased because I like so many the same things that you loved as a kid, a lot of the same games, etc and I think given a lot of what you said about how you hire people. You'll like my traditional closing question for everyone, which is to ask for the kindest thing anyone's ever done for you. I really think that so much of life is about the little things and about the consistency of a little things that people do making coffee for her husband, my wife popping for me it sort of in exceptional grandiosely like it's not the most time thing that everyone's silly ever done to be. But where that comes from in that kind of kindness I think is really what's magical about relationships and when a co worker thanks for doing something nice for the more for a job. Well, done that kind of consistent kindness I think is really what makes the world go round? I'm GonNa go with that is kind of similar to the five wise exercise like there's something behind it all that's most pure interesting I love it as a different kind of answer to a question really appreciate your time here today Jason I've learned a lot it's great to meet you Patrick was fine. Thanks for having me. This episode was brought to you by Microsoft for startups. Microsoft startups Global Program dedicated to helping enterprise ready to be startups successfully scale their companies. In our five part miniseries we were talking to Evan Riser CEO of Admiral Security about his experience with Microsoft startups. In this week's episode with Evan, we talk about choosing to work with Microsoft for startups and his advice for B. Two B. Enterprise entrepreneurs. I think one of the tendencies would be to think about choosing a cloud provider vendor as a pretty near term decision of the you're about to start working with immediately. But maybe there's a case to be made that the decision has a lot to do with where your business will be many years into the future curious what you think about that and how that Wade into your decision choosing Microsoft. So I think that's a great point I do think entrepreneurs tend to be a little bit shortsighted focused on the here now, which is, which is natural. I think is an opportunity for entrees a lot more about what? They want to be when they grow up and where they WANNA be if you're trying to build consumer mobile application, right you probably want to be on the APP store and you're GonNa have a tight partnership with apple other handwrite. If you're trying to build enterprise software product for large enterprises, you'd think about where our enterprises and reality is the grand majority of large enterprises are building investing in the Microsoft ecosystem and I think that you'll Microsoft's critic great ecosystem enterprise startups to help with go to market distribution to help with practice elements and help with procurement purchasing to make it easier for both your startups and customers. Evan I'd be curious even though you're only a couple years into this company, what your advice would be looking back for those that are starting new companies enterprise facing companies for the first time. When advice would you give them? That's a great question I. Mean there's three things or maybe top of mind for me. One is like we talked earlier you want to start with the end in mind if you WANNA create you WanNa have a snowflake or crowd strike Calabro Pio need to kind of understand what in. That business is going really well and build that into the plan from day one if you WANNA have high-speed sales that's very effective cost effective but then you want to invest in things that celebrate your sale cycle in your billy to allow enable customers to procure it. The second thing is a lot of founders to be more clear about what their job is. There's a lot of chaos superhero personalities that start companies tried to everything at some level I think the founder and CEO job also comes down to. Identify the right roles, getting the right people in those roles, host the high bar and getting out of their way, and then finally, just like ours awarded the existential risks business what is the most important thing to focus that team on and the final thing? I'd say is a lot of steps tend to focus on the SNP markets and I don't think they shy away from the enterprise i. think that was me good advice ten years ago but I think it's easier than ever to get into the enterprise. With, all these cloud deployments where customers can install on one click, they can see results they can buy through Microsoft right and they had the credibly behind that. That enables customers to find innovative solutions and procure them very quickly, and just as an example, know we we started the company in. April. Two, thousand, Eighteen I. Think by December we had our first fortune five hundred company and we couldn't have done that without us new cloud native platforms because I getting back quickly and then kind of your accessory best also. To find more episodes or sign up for our weekly summary visit investor field guide dot com. Thanks for listening to founders field guy. Own

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Joel Greenblatt on understanding market factors, improving public education, reducing income inequality & more | E1159

This Week in Startups

1:32:40 hr | 7 months ago

Joel Greenblatt on understanding market factors, improving public education, reducing income inequality & more | E1159

"This week in startups is brought to you. By vanda compliance and security shouldn't be a deal breaker for startups to win. new business. Vantage makes it easy for companies to get a sock to report fast. Twist listeners can get one thousand dollars off. For a limited time at vantage dot com slash twist and broker the broker. Startup insurance program helps startup. Secure the most important types of insurance at a lower cost and with less hassle. Save up to twenty percent off of traditional insurance today at broker dot com slash. Twist while you're there get an extra ten percents off by using offer code. Twist and our crowd helps you. Invest early in pre ipo companies alongside professional vc's. If you're interested in investing you can join our crowd for free at. Oh you are cro. Wd dot com slash. Twist everybody welcome to this week in startups. The podcast that we've been doing for over a decade and over eleven hundred episodes and we talk on this podcast about technology startups investing in startups. We don't delve too much into public equity s- because i've never been public equity guy but lo and behold ten years later i've got to companies three companies of public. All the specs are happening. And i find myself drawn to maybe understanding the public markets. A little bit better than i do as a private market investor and a friend of mine said. Hey you have to read this book. This guy has a lot of common thoughts with you. Do about them and maybe problem solving and i read this book. It's a tiny little book. There it is. It's not that thick. How many pages we're talking about here. I think it's a four hour. Listen i listened to it. Yeah under two hundred pages and the book is called common sense. The investors guy to equality opportunity and growth. And it's by a guy named joe greene blat him. Now if you're in the stock market and you know who he is because he's written a bunch of books that were salaries and that became basically bibles of people who are into public stocks. Things you may have heard of this book you can be a stock market genius little book that beats the market little book. That's still beats the market. The big secret for the small investor and he is the co founder and managing principal and co chief investment officer tons of titles there from gotha gotham asset management for the past twelve years. My understanding is joel that you used to run other people's money and now you run just your own. Welcome to the program. Do they get that did they. Get that intro right Well i started one thousand nine hundred five so ran outside money for ten years and then started running outside money again in two thousand nine god it. She took a little break in the middle. Yes and according to my knowledge of public market investors who run funds and stuff like that which is basically limited to what i've seen in popular fiction ligon billions when axelrod says screw it. I don't want to deal with all these. Lp's anymore people's money under run my own and do it my way and then it goes back saying you know what maybe i do. Want to run other people's money. How do you make that decision is it. is it. just you're annoyed at the lp's or you feel too much anxiety about running other people's money you kind of went into it in the book. A little bit of this really hard decision of and i think about this a lot and it falls into being staked in a poker match as well. You can affect your players picker if you're betting your money versus other people's money and perhaps in a bad way so explain how other people's money factors into your behavior as an investor. An interesting question. So i ran outside. And i started nineteen eighty-five five. My own firm. Gotham capital outside money for ten years. We did very well And we had done well enough to keep our staff and returned the outside capital into run our internal capital The reason we we returned it is that A number of reasons one. We're very concentrated investors. So it's quite volatile Department ruggles who join me nine hundred eighty nine and every couple of years when say concentrated their six or eight names and that's concentrated. The us are eighty percent of our portfolio is concentrated in public markets and every Couple of years you'd wake up and lose twenty or thirty percent of your net worth and since we know what we own and it s just one one or two things. Don't go your way for a little bit or you're wrong or a lot of things happen. And when you have outside investors that feels bad you know and So my investors great to us but it got to a point where i love the business of trying to figure things out and investing in them but i think the added pressure of having other people's money Didn't make it as much fun. So when we had the opportunity to keep our staff and continuing on our internal capital and returned the outside capital we did and it was interesting. And i got five kids and so it was nice not to have that pressures will. It is an added pressure when you're placing a bet and you're saying man. I know that this one. I believe in this one but i know this all this downside to it as well right. There's some amount of risk where it wouldn't be bad it wouldn't be the two can't be gained without losses but when you've got other people's money you're like i don't know if they would make that bet right or or do i want to. I would make this. I want that alpha beta whatever the the delta of what could happen and all this craziness when you're making you start thinking about the other person in their mindset and that kinda gets in your head doesn't it well us. You're saying that you're you're not as experienced in the public. Marcus in public markets gives you a quote every day. And that's very harmful and you know if you lived in your house and they were do assessments. Every single month you know of whether went up or down my bother you a little bit in the stock market. Get it every day and so whether you're right or wrong we're starting at. We're at least trying to look out to three years and you know if they give you estimates every day when people are emotional again excited they'll pay off from things and when they get excited the wrong way and more depressed still. They'll sell things. Ben gray at who was warren buffett's teacher said you know you really in business with mr market and you never know what side the bed. He's going to get up in. The morning is pretty emotional guy. And so you get those quotes. It's a little different than being on the private side. Where you know what your own you're thinking longer term Stock market unfortunate quotes everyday. So it makes more difficult to keep your head and yeah that's scorecard is great when it's going up but like you said so much of it is emotion and then you have all these outside factors and there is very weird phenomenon when things are going up. People want to sell and book the win and when things are going down they wanna stick with it. This investor psychology of. Let's call it your lp's or my lp's vacant skittish and they make bad short term decisions. When you and. I know i think you having obviously much more experience than i do but but added for years investing in private companies almost overwhelmingly with a winner. You just want to sit on your hands and take the win but then everybody when we have a winner in our portfolio says we selling selling a secondary. Are we gonna take some chips off the table. I'm not sure you wanna take chips off the table right now because this thing's a rocket ship if any we might want to put more fuel into it. Can you talk a little bit about what you learned as an investor for over three decades In terms of sitting on your hands and not selling verses this phenomenally bad behavior of neophytes short term thinkers where they sell them winners and they hold and they and they dollar cost averaging until losers. Sure so you know. Warren buffett always say you know michael jordan to well. It's like let's get rid of him. You know he sees taking too much report. Folio jones scored twenty points. Let's get rid of him. And you know that's kind of sometimes the thinking you know. We're you know traditionally. When i got started i got started doing more special situations in interesting Extraordinary transaction so really. It's i described in my first book. You can be a stock market genius idea. My in used to shop at tax excels in country auctions and yard sales in connecticut when they went up there for the weekends and i described what they were doing and when they found a painting like a yard sale or auction. Their question generally wasn't. Is this paint or going to be the next picasso. Their question was oh. Was there a similar painting by the same artist. Just sold at auction for two or three times when i can buy this one for so very different skill sets you know. They're both good skill sets to have you know. Is this guy going to be the next picasso. That would be great. That's a that's a lot much tougher nut if you can ashley We used to do is look off the beaten path for bargains. That other people were looking for That's more of what i I was doing in my earlier career. Now we're looking as you're discussing buying good businesses. That are cheap. And that's really how warren buffett evolved in his career. He started buying just bargains and then he said well if i can buy good business cheap. That's much better. And an investment style over the years has evolved much closer to that in which case you can stay with the businesses. You know if you just sorta dumpster diving for things that are achieved holding for the long-term if it's not a great business may hurt you on if you are investing good businesses that have good long-term prospects than of course It lends itself to being long-term investors. So it's very different ways a lot of different ways to make money. We've done them all and they're both good. I don't i taught at columbia for over two decades and you know mba's and i teach All those methods. I am agnostic. S to smart ways to go about Making a profit both. How do they differ in terms of skill set and also timing because it. I am just taking an assumption here but it feels like before the quantity and a large number of people participating in the market Retail investors which we saw in the dot com era up until the great recession in two thousand seven eight. And now we're seeing again because of this little company i invested in before they launch call. Robin hood has fifteen million traitors. Or something like that in the market. How do these strategies differ when you get over participation in the market at the same time as the number of companies that have gone. Public gets cut in half. These are outside factors. That must impact how you play your game because you're not playing your game in a vacuum. There are other people at the poker table. I want you to answer that question. We back from this quick break. Why is sock to compliance critically important. You hear it all the time sock to talk to well. If you don't have to button duck you can't close major companies as partners and customers. It's that simple. And guess what van is going to give you a thousand dollars off your vantage compliance process. And this is something. That's very important what they're going to do. When you get your sock to with vantaa is gonna continually test against technical and nontechnical sock to requirements and they also have partnered with over two dozen audit firms who have been trained to file to reports directly in atlanta on average the vantage customers. Get their sock to compliance in. Just two three four weeks. Compare that with three four or five months without van and you understand why everybody is going crazy about it. I just had a twist listener. John email me. he's got the drone startup kittyhawk. You may have heard of them very famous. And he says van essential in helping them get sock to compliance up and running and he loves tie-ins to google slack. Get hub in aws which are all essential apps that run kitty hawks awesome. Business event again is giving twist listeners. A thousand dollar discount on their subscription right now and i know many of you taken advantage of it via mta dot com twist vantage dot com slash. Twist for a thousand dollars off okay. Let's get back to this amazing episode. Welcome back we have a really big gala guest on the program. Joe greene bland now. I didn't know him. And i feel stupid that it didn't know because i'm not into the public market is a public market. I find so confusing because thoroughly stocks. That act weird and i don't understand it when these companies get so big and they start doing all this funky accounting. All i know is three or four people in a room. They have a good product. And i think they're smart. I make a bet but you do this. Very different thing. In a market and a casino have outside influences and before went to break. I was thinking about these. Two outside influences in relation to two types of investing. You have and i guess we could vector them a two by two quadrant here and go through it which is number of market participants in a market in relation to the to investment strategies. Both which really ones bargain-basement. I guess you could talk about finding bargains. And i guess the other would be buying great businesses when you put those against a small number of companies in the market and a large number of people wanting to participate. That's got a screw things up right. Well it's interesting. There's another data point that we should throw in there that cap now even though there are half as many publicly traded companies as an even less than that when i then when i got started the more the market cap of those companies is much larger than the market cap relative to let's h. e. p. or something like that and then when we had more companies they were just smaller so the market cap the total market cap of the market is actually bigger on a relative basis than it was twenty years ago when there were twice as many companies to choose from And if you like to look for bargains. I'd rather have more choices and and especially more small cap companies. Where people aren't looking so i think that ha- has impinged on you know smaller investors but the s. and p. Five hundred you know. They're they're over three thousand Publicly traded companies now in the us the snp five hundred dollars approximately ninety percent of the market cap of the entire amount so the remaining twenty five hundred companies only ten percent. Something along those lines so when we talk about the numbers. That's that's really how it stacks up With is ashamed to be. Honest is the high cost of being a public company. You know it costs between two and four million dollars to be public so if you are a small company you want to go public and only have ten million in sales or twenty million sales you can forget about it you you have public companies fences of two or three or four million dollars a year just you know making all the filings and makes no sense and even if you had ten million in profits. I'm not talking about sales. Ten million a prophets. You also can't be public twenty or thirty percent of your net income and also doesn't make sense to be public and that's a real shame because they've tried to make some changes is obviously hasn't been effective and that's why you see shrinking of the amount of companies so much regulation has let small companies. Not be able to access the the stock market in the way. They should take away dynamism and a lot of other things that the of markets could so. I think there's a lot of overregulation there. I think they've tried to make some corrections with all kinds of different things. But i just you know. Now you're giving me some place to complain. I would complain about that. That i think that there should. Yeah i mean you look. At other markets that are not as robust as ours and that do not have the same legacy of freedom that america has. that's ingrained into our system. I'm thinking specifically of australia. Japan and the uk where i get paid constantly by what kinds of weird gazebo reconnect companies public with ten million in revenue. Fifteen million rob literally. I just had this email from somebody who is trying to move some of our startups to uk. Australia not move them. But you have to float them in those markets. Even japan you can float a company for ten twenty million dollars in revenue. And they're like it's three hundred thousand dollars and we are the we are the tip of the entrepreneurial economic spear for the entire planet for entire humanity and we are anchoring ourselves we've literally angled our economic system it order to protect people from losing money. This makes no sense. Now i agree with you. And they've made some efforts to have these small markets there where there's less regulation and you can raise a little bit of money. I would just say. Those efforts are tiny in comparison with. They should be self hopefully though expand those at some point because as you're suggesting us great countries great place to do business for the most part still a matter who's in charge and at least is better than most other places and you. It'd be great. You know right now. Entrepreneurs can raise money but you have to be in certain techy businesses or certain hot businesses that private equity guys who were guys wanna on a back and so it's not not so easy for everybody just a select few so i think public market democratized that a lot more and you know. I wish there were more public companies. You know. hopefully that'll turn a little bit in your era in the in the early days of your arrow when you were in the game you had this. Incredible companies like the home depots and the fedex's they went public at very low markups. What were the companies that you bet on Or that you wish you had on passed on in that early era when there were two three times as many public companies that worked out and that would have been able to go public If that wouldn't have been able to public. Now yeah. I'm not gonna get into that. I mean if i talk about all the things that i missed over the years you know i really have to think long and hard of course i just kind of the way that it's gotta be one that got away that just burns well. I certainly looked at apple a number of times during you know it's the life you know even after it got crushed after the internet bubble and you know has still had a chance Steve jobs came back. And you know there are lots lots of people who did by then and you know what that turned into. Obviously they didn't even have the iphone at the time and everything else but you you could bet on the jockey and there was the opportunity there ourselves. That's what you re in your head because we all as poker players replay the hand that they played incorrectly or they played sub optimally. What's the lesson you take ford from that. Yeah i think you can't look at the current metrics so much. You really have to look forward. Say once the market opportunity for this business. You know it's it's kind of like another one. I missed you know in the eighties. When i saw it looked like a great business was walmart so if you look at the metro metrics for walmart when it has fifty stores if it has the prospects to open a thousand or two thousand stores. The metrics wanted has fifty stores don't mean aligned. Yes so just missing that. And even if you paid with sam sounded like a higher price for those fifty stores but realized no they actually have a model that can be expanded twenty thirty times. That's much simpler than figuring out. You know the next texts stock or something that's just you know multiplication skills so those are the ones that also bothered me because i when i tell my students is i've done quite well in the markets. Not only because. When i started in the early eighties the market hadn't gone up and thirteen years. So any idiot who started You know that was a good time to get started. But also we've done pretty well and you know made you know my partner and i always laugh. We made so many mistakes and if we work for somebody else how many times we would have been fired. You know for doing stupid things and still we did well and so i find that should be encouraging students anyway and so i always tell that story. Yeah i concentrate on the ones. I miss wood coulda shoulda. I'd only really matters Especially when you're looking to stop what you actually did. And if you if there's always plenty of errors of omission and if you can minimize the hours of comission has it with say that's really what to concentrate on so famous lines. There's no called strikes on wall street. You can lead twenty go by maybe bought six of them but if the one you bought works out dad works. That works out well too. So that's in a way. Yeah fiona poker game if you fold a bunch of hands and you hit the flop you tokay. Don't worry about it like all. These people are who turn over there. Play cards stroh essentially play. i play poker. I'm just for only things. He's good so. I don't like to lose my money doing that. Whichever have that ten jack suited and you're just like i kept on the bubba. I could play it. And then you watch the flop and it comes down jack jack ten and you're like oh my god i mean it. You wouldn't be idiot if it came down like a king and brick in like you got you. You dodged a bullet. You can't look backwards that we get back on this from this quick break. I want to talk about education. You start the book out talking about education and you are on fire in this opening chapter. You are tilted to use a poker analogy about the state of education which i see as a trend bloomberg anybody who's done well in the market or in business or in capitalism when they see the state of education the lose their minds in their appalled. But you have great ideas as well about education. I wanna talk in the next segment about some amazing ideas and fights you've had about charter charter schools. And then i want to ask you about income. Sharing agreements something. I've been looking deeply made a couple of investments on when we get back fund this week in startups pay everybody. I wanna take a minute to thank him. Broker for sponsoring this week in startups and supporting us all year long. What a great company. And it's very simple. You need to have insurance. 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Omission insurance is called edo means if you make a mistake and major customers are going to ask for insurance if they want to buy your product and finally this employment practices liability ep l. She going to talk to your attorney about cyber dino and finally ep l. and the best place to get insurance ted day is that in broker dot com slash twist e. m. b. r. o. k. e. r. dot com slash twist. Where if you use the offer code you get ten percent off. They do a great job they do. Many of my companies can broker dot com twist. Get that ten percent off using the offer code. Twist all right. I want you to stop doing right. Now i want you to amazon audible or your local bookseller. Whatever you prefer. Get the audio book. Get the book. it's called common sense. The investors guide to equality not equity equality opportunity and growth and it's a bit about markets. But it's also about how to solve society's biggest problems. If i were looking at this book and i didn't know you say you thinking about running for office at some point you ever think about that knows actually. I thought about writing a book. Which i did you know. There's i guess between looking for power or influence rather have influenced and know maybe have some people who are braver than i am to Give them some ideas Or at least the way an investor we look at the world to try to to try to fix some of the problems that you know everyone pretty much sees so you start out with education in the book. I thought this was actually along with your minimum wage thoughts in the book to things that i have been obsessed about the minimum wage and education because they are both so broken. And it's so easy to fix at. Everybody believes that these are intractable problems. That cannot be fixed. Which is bizarre. Because you and i come from a world in which we deal with people who obsess over solutions and in those two spaces. People seem to have lost their creativity or belief in testing things. You look at education and you look at charter schools. And i know you've been involved in Charter schools and you're in new york. My hometown and my bloomberg flat this fight. Tell us what your experience was in trying to just make it a little bit more equal and fair because the people who are at the other end of this bad trade of this corrupt system are though the most vulnerable in our society. The poor the disenfranchised. What did you learn about education when you start a rolling your sleeves. Sure will you know. I you have to look at the problem. What what's going on or at least acknowledged there is a problem. So if you took our look at our top fifty urban centers and you look at the kids who are low income or minority odds of graduating college which supposedly is the goal of our system whether it's right or wrong question but as the goal of our system of the chance that If you are poor in or of minority low income minority one of our major cities your chance of graduating colleges one out of eleven all right so failure rate at ten eleven. We know the college graduates are seventy percent more than non college graduates so we know people care about that and the thing i guess. That's most disappointing. That people don't realize is that it's those ten out of eleven that are failing is not because of lack of ability. I'm involved with a charter school Network called the success network. It's run by woman named eva moskowitz. And she's you know one of the great she uses of our time but those twenty thousand kids are seven percent minority Close to eighty percent free and reduced lunch. Those kids as gruber would be the number one school district in new york state. They beat the kids from scarsdale. The kids from great neck. They'd be number one over ninety percent read and do math at grade level which is well more than double the regular schools. If you just took the group of kids who are currently homeless than our at success they beat all the kids from scarsdale in great neck and all the top school districts in the state is well so the goal either and then it also talked about a district school. That's run incredibly. Well it's run by just retired but this principle His name is jackson tola in one of the poorest districts in brooklyn and in his school ninety nine percent of the kids has the math test ninety four percent of the kids. Pass the english test. But i just gave you the stats for the for the kids who have disabilities so ninety. Nine percent of the kids with disabilities his school. Pass the math test. Ninety four pass the english test over ninety percent of the kids who are english. Language learners pass the english test the equivalent statistic and their other district schools is nine percent. Hold also my. They're some insight there. The these you're saying these are people with disabilities. Are we talking. About physical disabilities mental disabilities learning disabilities. They're they're different kinds. But they're usually learning disabilities should wait. Wait your disability school. The kids in his school that have learning disabilities outperform. The other kids in the district who do not have learning disabilities by more than two to one. Yeah that makes no sense. Wait a second. You're saying the people who literally are coming to the table with a handicap that literally have a diagnosis learning disability. Beat their peers. Without that what do you take from that. What should i said this is the i found it because success had when you look at fourth grade test scores success had eighteen of the top twenty five elementary schools. They forty seven schools. Success that eighteen of the top twenty five Six of the others were gifted and talented schools. Means you test into them so there was one school left. It was a district school District school in a poor district has had who the heck are those guys and of course it was the school. I just described run by gentleman. Jack's potolo in principal for thirty four years and my conclusion it he's probably the best principal state. And that's you can't reproduce that the shops yeah. The average principle will be average. I mean you can't escape that but what it shows me is with the right supports whether you got to go to that charter network. I talked about and all the great scores there. Or if you had you got a chance to go to a great school What that said to me is these kids can do it with the right supports. And that's huge so if ten over eleven failing it's not because they can't do it and i took that and ran with it and said with the right support and the way our school districts are set up is by definition. If you are low income you go to the worst schools because anyone who has means who can move out of the best school district. Do i mean People with means or just the lowest in the who are not one of the lowest income. They have school choice. They can send their kids to private school. They can move to a better district with a better school. They can afford the more expensive home and literally our home. Prices are correlated with the school outcomes. So i happen to live in the bay area in a district. That has the best middle school in all of california. The home prices are fifteen or twenty percent more because of that fact because we are one two or three in the rankings for school in middle right so what automatically happens is get sorted that way if you if there's a bad school in your district and People move out four to move out and who's left is the lowest income kids go to the worst schools There's a big fight as you mentioned against opening charter charter service. You can get in through lottery open lottery and so that's one way out. There's big fights the best. The best charter were new. York massachusetts california big fights not to have any more charters in all those areas. Why why are people fighting success. This makes no sense if anything we should be studying success like you and i do for a living and placing more bets on the strategies that have previously won. That certainly makes sense to me there. why don't we say without getting into some big battle that there are a lot of entrenches in the system It's a soviet style system where there are no penalties for doing a bad job and and so people who were in that system like to keep their benefits. I don't want to get into to bigger fight. Because i'm really about side for me here. I mean if you look at it. I i mean i'll say right Outright you're talking about teacher unions you're talking about entrenched unions that are supposed to protect The workers interest but they have gone so far off script that they are now crippling and giving the people who are at most vulnerable in our society they're giving them the worst quality product in you used the term soviet style and i literally put him my show notes after reading your book. It's almost as if we're running. Our school system like it would be run in communist. Russia were literally rewarding people for doing nothing for not having outcomes. We've disconnected the outcome from the compensation and from the strategy. I mean it would be like having a basketball game in and saying it doesn't matter who scores the points doesn't matter who puts the ball in the basket where or or running a vaccine program say eight doesn't matter if it has efficacy just matters that you showed up and worked on the vaccine right so but the the big problem in why i didn't spend a lot of time fighting unions or the status quo or anything you know k. Through universities trillion dollar a year business charities not gonna make much of a dent in a trillion dollars is a lot of entrenched interests You know you just in new york city alone. They spend thirty two billion dollars. A year on the district schools So a small band of charters not going to win that battle. There's a lot of money and insurance interests and so in the book. I said you something. I used to tell my students at columbia. I i would ask them. How do you beat tiger woods. And the answer is don't claim in golf so in other words. I don't wanna be a head on collision with the entrenched interests here. Would i wanna do look for solutions. I'm not saying we shouldn't try to fix the district schools or do as much as we can to fix our current system but if we want change certainly in my lifetime in the book i took some time to point out. What's going on as you're suggesting. But i'm really more interested in. How do we solve these things quickly. And i think the way the world works now. I think we have a great chance to do an end run in other words. Don't play tiger woods in golf to an run around this car system round than bang my head against the wall try and get crushed by a trillion dollars Set up against the face the car system. So i made some suggestions in the book About how we could do that. And i actually said that. Companies like google microsoft amazon j. p. morgan. These are the solutions. I'm not their responsibility. But i having a diverse workforce. And i go through the stats of that is actually very valuable for these businesses. They're also under a lot of fire you know because they're they're semi two per successor. Yeah yeah we'll get back from this final break. I want to talk about the solution. You came up with. Which is absolutely stunningly brilliant. And we'll get back on this week in startups. Do you wish you were in on some of these amazing. Ipo's in two thousand nine hundred twenty twenty well with our crowd. Oh you are. Cro wd can invest directly easily and most importantly early our crowd investors have already benefited from companies. Going public. Like beyond meat or being bought by companies like intel. Nike microsoft oracle are crowds investment professionals leverage their extensive networks and they review some of the most promising private companies and startups in the world. And as you review these the you'll have access to our crowds investor relations team and they have already invested hundreds of millions of dollars over two hundred companies with dozens of exits accredited. Investors can participate in a single company. Deal for as little as ten k. And you can get into one of our crowds funds for as little as fifty k. You can join our crowds investment in blue green water technologies startup. That keeps our water safe. It turns out global water. Supplies are under attack from toxic algae blooms and that makes someone drinkable blue proprietary. Epa approved technology eliminates that toxic algae from poisoning the world's water resources. So you can get in an early on blue-green. I just invested in labral which is an. Ai enabled platform that uncovers online. Disinformation and deepfakes. But that's a cool idea right. We're going to need to get that solve. So i bet. And i went to our crowd dot com slash twist to review the deals. I found that deal. And there's no payment evolved until you decide to invest which is amazing. You can just read all these memos you can peruse get in there and just read all the deal as you can and our crowd has some great deal flow and i just made an investment for the first time mark row dot com slash twist. Joe green black is with us. The book sense the investors guide to equality opportunity growth. You talked a little bit about a solution charter schools. Obviously our solution. They've been angled and people have fought them in created so much red tape for them in the de blasios stories. You go into. And i mean this guy is a complete disaster. I mean i'm not gonna make you say but just as a former new yorker living in california now and i'm watching this crazy behavior. I mean they really tried to scuttle every single charter school. They said if they broke two hundred fifty students then they had to unionize but they they and they kinda made double rules for them where they couldn't get around that and they wouldn't give them space even though there was unlimited space available and then forcing them to add administrators. All this kroft not only were they to blasio in this cohort content to create a terrible product. They were actively trying to destroy the innovative product. I mean it was dark. I'm gonna leave it at that that you read these stories in the book and again we're gonna keep our eyes where the puck's going and a solution and not playing tiger woods off. We're gonna try to get them to the chessboard and the chessboard. For you as you pointed out before the break google facebook etc at al they all are under a bunch of scrutiny. Because they've been so successful. I wanna get into that. And if we should break those companies up or not in your mind. I have strong feelings on it. But you said hey. They need specific types of people and they don't care about college credentials anymore. They used to be obsessed with it. They now care about skills and that seems to have burned a little connection in your mind. Explain it sure so in the book. I suggested that these companies like microsoft google amazon. You know pursue something called alternative certification And what that is is. I'm not saying that. Let let's just for example. You wanna get a job. microsoft's looking for employees in their hr department. And what i suggest. Microsoft do is say which tests which courses which certificates can you get in lieu of a college education. Which can you pass through dwell on which tests would certificates which courses can you take in lieu of a college degree that we will consider for high paying job in our hr department. I'm not suggesting that microsoft make tests. I'm not suggesting they administer test. I am just suggesting. They set standards and if they set standards of what are these tests. What are these courses. Mckinsey has They could be literacy. Tests our certificate programs or imbo together with mackenzie has set up a game based tests which supposedly tell you how good you are at decision. Making and critical thinking skills doesn't matter what these tests are just has correlate with what they think will make a good employee but not a college degree once they set these standards it'll set up a whole ecosystem of supportive services. Online resources tutoring services to help people pass these are. We already proved with charters and the best district schools. That the right support. These kids can do it. So it's not a question of ability to ten over eleven ten out of eleven. Who are not getting college degree. So what can we do for them. We say look. These are the courses tests or certificates that you need and we will consider you for high paying job at hr instead in lieu and they don't have to make the test. They don't have to administer the just have to say what are they are and then capitalism will take over they'll be an ecosystem developed of support resources. I said tutoring and online resources. They'll be rated like gruber drivers airbnb rentals. Also people know which wants to do. You don't need any government involvement at all and the costs will be much lower end we can short circuit run around. We don't play tiger woods ncaaf. We don't worry about the college degree. These talev got screwed in the current system. How can we do an enron And i talked about how in africa with no resources About a cell phone company that set up these are a cell phone company turned into a three billion dollar business that got sold a few years later in dade salt cellphones in countries. That don't have roads. That don't have electricity. But so who's buying a cell phone. Well they figured out how the locals can afford twenty five cents rather than walking three days to the next village to sell their crop. It was worth twenty five cents to pay from col. See what the prices were so they could start with a little bit of money to build cell towers had to do rudimentary roads to get to the cell towers and bring electricity and jump started the whole thing and so once there's a buyer so the we they found the the twenty five cents it was worth people they scrounged up twenty five cents to talk on the phone and now there's a buyer these big companies amazon. Google microsoft are now sing. Where the buyer pass these exams. Pass this certificate program. we'll we're buyers now. The supportive system sets up and it's happened. So many quote clay christiansen many many times of how this happens about how disruption happens and this is exactly how it happens. You know the Apple computer came out as probably a lot of your listeners. Know Cost about two thousand dollars. I couldn't compete with a two hundred thousand dollar mini computer that needed ten engineers to run but eventually it kept getting a little better. It ran on a little different track and it was eventually able to compete. And so i would say that this alternative certification over time may not be able to compete with college degree right away but i think very shortly It will be an all we need is the jump start from these big companies and i think a lot of companies will take the standard set by google microsoft j. p. morgan and use those standards for themselves. Hey this makes good employees if they pass these exams and i think we can sort of do an enron around the car system. Absolutely if you just think about what's happened in the developer space those companies had such an acute need for developers and there was such a shortage of developers that they did this type of thing in the in the developer space where we have had code schools. you're in new york so you know a bunch of them just absolutely flourish and they did it with Charging ten thousand or twenty thousand dollars a year but there's free code camp and there's lambda school which we've made a little investment in And other services online where you can learn this either for pay or with this. New device financial device called in. I say which has existed by milton. Friedman came out with them and they did some y'all experiments on them that failed because they pulled the is as as opposed to making them individual and they didn't connect them to a specific job. Like you're proposing but with these ayas working developers we just invested in a company. That's doing it for people in marketing and growth. And i think it's gonna go right down the line where you start. Essentially a trade school an online school. It's a ten k. Or twenty k. eissa income sharing agreement. Which means you only get paid that as the school if the person gets a job over fifty thousand dollars a year and they can pay it back over whatever it is five or ten years and then they're released from the ice do you as somebody who works in finance. What do you think of this. Financial device of the school only gets paid. If you get a job that pays over x. Amount you know i love that model. I don't know how big it can get very quickly. I think that another way that we can get alter said like google for instance has created six months certificates already. Yeah they created though certificates in about three technical so that's really nice start But those are technical areas. There's only three. Google had a right dose programs And i'm suggesting something much easier I so would be one method to get there. But i think if we just set standards It's it's much easier for them. Obviously they'll have to do some research. They're very good at data. Die hard at these companies to look at what correlates with good job performance here and i think all they have to do is set the standards and and there'll be many many different ways that people can learn. It doesn't have to be taking a formal course. It could be online. Sharon can make a difference here. that's where community can get together to help people take different courses. It doesn't have to just be in technical areas. It can be in all kinds of errors described that in the book like i said the hr department of the marketing department doesn't have to be You know a computer program. Which i think is the first place that everyone's gone because it is very clear avenue and i think that's great but i'm not asking anyone to make courses or tests. I'm just asking them to set standards and the ecosystem set up in so many different ways and one of the great ways that could be is in these courses. They get paid from people actually getting the jobs later on so i love that system. I think it's gonna be much broader than that. That'll just be one of the avenues. people can pursue. I'm looking at two other ice investments. I don't know if you invest in the private markets But i'll loop you into them. If i get a deal structured But there are people who are now doing platforms for isis. And this one company. I was talking to. They provide like amazon web services almost like a cloud to anybody who wants to start a school and then they don't have to worry about wall the infrastructure for setting up isis. They'll manage all that for them and outsource it and they actually have done it with traits plumbers and electricians so you can take this plumbing or electric or the those already existed but they were having a hard time getting people to sign up for twenty thousand dollars or ten thousand dollars a ticket and then when they did isis. All of a sudden. Everybody's like oh. I don't have to put up the ten k. And take the risk great. I'll do it we. We actually have a shortage of plumbers and electricians that's happening the average age of those professions now is over fifty and nobody wants to take those jobs they don't even know how to get started in them and there are other places in the world with those professions are looked at as really great ones Let's let's shift him and move over In terms of I got to thinking go. I think i'm gonna go with the t say the earned income tax credit. I have been looking at the minimum wage. The minimum wage is seven. Twenty five for those people. Don't know it. That's the federal minimum wage in cities like seattle san francisco and new york. They have been in florida recently with their ballot. Measure all to a fifteen dollars minimum wage. I think the first to get there were seattle san francisco zone with their new york. Somos there and at the same time as this has occurred amazon com which is hated by a lot of the aoc crowd and the elizabeth warren of the world very personal bitter attacks from the socialist party in or the growing socialist party in america were compassionate capela. Whatever they wanna call themselves socialists. In my mind they have been writing heart amazon. Just got ahead of it. They said we're going charge. Fifteen dollars an hour of the gig. Economy was giving people options and pre pandemic with the lowest unemployment in the history of the country whose extraordinary high functioning capitalism with a massive competition for the lowest paid employees. Whoever thought we would see that everybody thought it was going to be the opposite. What happened in the marketplace where companies got into this rabid competition for low end employees entry level. Whatever you wanna call them. That drove companies. I think walmart also went to eleven or twelve dollars as their minimum wage. Because they're getting crushed because they can't find employees and even mcdonalds. I don't know how you feel about the company. I've ties with them. They were actively fighting. Minimum wage increases for the last two decades and they just agreed to stop fighting the minimum wage so they haven't decided to advance but let's let's open up minimum wage and start with pre pandemic. How did we get to the place where capitalism worked and you had a rabid Absolute dogfight to get gig. Workers and entry level employees. What went so right. Sure well for or is it right. Did he go right. Sure whether the general economist problem with minimum wage is that if you're if you're contributing eight dollars worth of value when you force people to pay you fifteen dollars a few things happen one. You know those places go out of business or they're not competitive or two. They use technology to substitute as much as possible. Because that's not. That's not a good economic argument. If someone has eight dollars of skills that they can contribute and you're forced to pay them fifteen dollars and so would talk about in. The book is our earned income tax credit. Nothing i invented this actually our biggest social welfare program in the country which we are basically for mostly people with families. We give them extra money. If you're willing to get a job a new and willing to work we'll pay you more okay and it would be nice if we could pay everyone. Fifteen to twenty dollars you know with the earned income tax credit we two thousand eighteen which the deny us in the boat we spend sixty billion dollars third biggest social welfare program in in countries. You know but and and it's a great program. I mean we take six million kits out of childhood poverty with that sixty eight billion But their study said University of chicago that show that actually the net cost is closer to nine billion. We spend sixty eight billion. But i took the view of an investor in all of the chapters in the book and on this one it turns out because of the extra employment taxes the sales taxes we collect. The lower seltzer welfare costs for getting people working. That wouldn't have worked because we're paying them more with your income tax credit meaning it's kind of reverse income tax. If you're willing to work we'll give more money and we we give that sixty eight billion of because of the lower sellers social welfare course and the low end the more taxes we collect. The net cost actually works out to nine billion dollars. And so you know. I suggested that if we wanted everyone to who's willing to work that's why i'm not for universal basic income. But if you're willing to work. I think everyone should get paid. Well is just. You can't force businesses to pay people. More at least from an economic standpoint is gonna work out well. You someone's contributing eight dollars in your forcing them. You're forcing business to pay them. Fifteen saw but i'm suggestions you willing to work If we could pay everyone fifteen to twenty dollars an hour minimum supplement their incomes from the private sector with the government extra funding to fifteen to twenty dollars that would cost a trillion dollars. We're spending sixteen billion that will cost us a trillion dollars but if you go through the same logic the net cost after that extra taxes we collect the lower social welfare other social programs People are now working with net cost would be about six hundred million. But here's the thing we now have. There was a study of the washington university that looked at the cost of childhood poverty and child poor childhood healthcare education crime incarceration homelessness. Social service costs. That's actually costing us right now. A trillion dollars a year. Mathematically making bats on Back stopping the impact of this low these low wages when we could just solve it front end and you don't bring up race in the book but we do have a race issue in this country. We've seen it explode during the pandemic in it is an open wound in this country. I think we'd all agree that we want to heal. And a lot of this is economic inequality. I think everybody would agree of course as policing and other things that are unfair but if you solve the economic problem i think you would have less people feeling like the system is so rigged against them and instead of incarcerating people in having a horrible education system that ankles them from ever succeeding makes it unlikely. Ten out of eleven. Don't succeed you could just put redeploy that money. And just take the wager that if we if we give them the earned income tax credit which right now just so people get an idea of just how this is. We're talking about for a single cup single or couple of five hundred thirty dollars a year. One child thirty five hundred dollars a year to children. Six thousand a year and three children plus sixty six hundred dollars a year. It's not like people are taking this money and putting it in a savings account. They're spending to live so all. This does is increased. Monetary velocity right. It's in everybody's interest to put this money to be his pockets and during the pandemic we had a dry run of you. Bi we just care. Drop twelve hundred dollars into everybody's account and ditch. Didn't you find it interesting. I don't know. I found it fascinating. Everybody debated you. Bi people's motivation always. It's sustainable. let's look at alaska. Let's look at other places you be is saudi arabia. The places that exist it causes all these problems with people stay home. They get into substance abuse domestic violence. All this kind of stop. There have motivation to live. Yada yada and we just airdrop twelve hundred dollars. Everybody's account and not one person complained about it including conservatives for public physical fiscally conservative. We did it and it worked it did. What did you take from that. You be i if you could call it. That or an earned income tax credit in the case of the p p p loans yeah pe laws that was in a way like an it. Say right well. I think a lot of those people really had a you know when you hide in your house. Don't go to work some of the lower income people. Don't get paid looser job. And so that's a lot different. Are universal basic income. Would be you get a certain amount every month no matter what whether you work you don't work or whatever and we can argue about that. I'm just saying if you're willing to work. We could get everyone paying a we could get everyone earning fifteen to twenty dollars an hour with this supplement and i go through the math in the book that we'd actually make money. We get rid of about half a childhood poverty. We get four hundred billion more in taxes We'd have two billion less than a dog medical costs. And so it ashley money. So as an investor we can take that money And make everyone earned fifteen or twenty dollars without making the private sector doing as far as the u. b. is concerned. I i like to encourage work. We can get into the discussion. I'm not against it. I don't think this was a very good. Kovin was not a good experiment for it was really making giant hall that people lost to incumbent wasn't proper results from it actually nova works. The you buy the reason to be against you be. I think we're both simpatico on this. Is i mean i had weeks of vacation or been in between companies and for two or three weeks. I lose my mind. If i'm not productive human beings. We built the definition of humans as a species we build tools and were productive when we build a society that is what differentiates us from from other mammals beings on the planet. If you take away purpose and something to wake up to do fine meeting. I think people lose their minds and it's chaos because we can see that right. Now talk about an experiment. People being at home the the amount of depression and mental illness that we're seeing from people just having to stay home in some people lucky enough to work some people. Aren't i mean you be. I would be a disaster for human motivation. What will happen to these people's minds if they sat for twelve hours a day an just left to their own devices. I think the experiments we've had it's resulted in in some cases radicalization because you have nothing to do all day. People have been radicalized in the middle east. Who have had euboea high that in alaska and other places you be. It's led to people having nothing to do and substance abuse that is that is the truth of this isn't it you know i i. That's my concern with it. I you know. I'm all for experimenting because I would love to see the results of that. I would just say that when you have a job as you say there's purpose you learned skills you can develop. You can move awful. And i and i would rather you know unless there's obviously if you have some kind of disability that prevents you from working. I completely understand that we should be helpful. But if you are able bodied and could work And you can find any job and you could make at least fifteen to twenty dollars an hour. I'd rather encourage that. Because keeping people in the workforce with contributing learning. I think that would be a great great thing for our nation. It we can afford to do it. Not only four to do it. But actually i show in the book from an investment standpoint. Make money doing it. So that would that's pretty. It's what so convincing about your book. Joe this is why this book is great is because you actually not only like it. Doesn't you seem a political to me in this regard and you just wanna see the problem saw by the most efficient model possible which comes from years and years of placing bats and managing money. And you just you get to hang out really smart people right in the job. Line that you both have you get to hang out with people who've saw problems all day and something's going to rub off because you're making bets on them. Elizabeth warren Seemed to resonate with the large number of people. She actually believes vouchers and charter schools. Which is very interesting right. Or she didn't awe. Well that's very interesting. So i point out that in two thousand four i believe it is. She wrote a book on that was in favor of school choice. When she ran for president she totally changed her tune and Is only for is not for school. Choice is four just because she believes it takes money out of the district schools. So i do talk about that. That she soil hundred eighty degree turn But she certainly understands the problem. I mean the way. I saw the commod. She saw that she in order to be a democrat and get the get for a democrat to actually get the nod. You can't be a business person you have to be woke and you have to be. You have to toe the party line. Which is every time you give people choice. It results in this existing corrupt school system to get worse than that might be true. But it's already terrible. So what are we have to lose here. Like people are protecting a system that is failing. It's infuriating well you know. I think most teachers are educated. They might be able to get many of them. Could better jobs in better places. So they're very dedicated but if you put them in a a failing system one you know if you're teaching seventh grade and your kids are reading third grade level who's to blame for that. It's a very hard job. The teaching you should just more involved in schools and teaching so really hard job. And i tip my hat to the teachers because they are stock in a system that is a soviet style system. That doesn't have the usual Consequences to poor performance and so You know i was thinking of it more the other day. I was trying to think of an analogy. Let's say that you moved into You had to eat at the same restaurant every day and Let's say there are some restaurants that How bad service. Bad food bad atmosphere and you have to go to the restaurants in your neighborhood and that's we have to eat every meal so who's going to end up in that neighborhood with the bad food bad service and People with no choice people with no choice. The and that's what happens with. Schools is very very unfair so all i would say is on for school choice to fix that system but i do think the great thing. The optimistic thing is these kids can do it. The chargers the best to shows the kids can do it. And i think we have now with the internet and and the ability of these large companies to put together standards and rowley opportunities for tutoring services in the end. The way education is being developed all over the place I'm really optimistic. Actually about the opportunity set in won't be through the traditional system. Hopefully that a pressure that will put the soviet system under stress being more time. We if we can run around the system if there's if if they can produce results outside the current system i it will make the card system better that. That's maybe the push that we needed. She she was also for this wealth tax insanity at least in my mind. I'm using the word insanity. We saw a wealth tax in france. And how that went while. The top earners laughed. Were seeing california and new york raise taxes and And new jersey in the more they squeeze the more people. Go to miami austin and low tax states it. What do you think about these wealth tax proposals where you have to then go take every asset you own get evaluation of the piece of art on your wall the car in your driveway the everything you own and then even if you want a private company you have to get the company valued and then pay one percent of its value. Even though it's a liquid even though the painting on your wall that may have appreciated. His e liquid is the wealth tax. And i mean. Do you agree with me. The well taxes go insane idea the would create chaos and move people out of because people can move people. Forget that. But we're seeing it right now my contemporaries in the silicon valley your contemporaries in new jersey and new york city are fleeing to save twelve thirteen percent tax of one percent. Well tax compounded is similar tax over a decade. You believe in it or not. I had one word i'd say. No it's ridiculous it's never worked anywhere It would destroy the public markets because who would ever go public again. If you had a deal quote that moved up and down let's just say they were wrong and You know it's very interesting. You know as the at least in the private markets in the same things happened in the public markets. You know if you owned. We were one week and it was worth forty. Seven billion dollars a week later on the brink of bankruptcy. And then you try to apply a wealth tax to one of those valuations on the wrong day I would just say it would be interesting. But it's also unworkable. So i think it's really just sort of a political discussion that people have when they're running for office by in practical sense it would. I would hope that will never happen. Wherever it's been chinese been a complete failure. I don't think we'll have to discuss it very much. I mean other than in a theoretical sense and then when people go through all the practical problems with david discussing and all the disaster will cause people spending time doing things that are completely unproductive is find look i for people paying their taxes and i think we should have fair taxes but you know some of the things that have been discussed it get your tax rates soon on some of these cities in the fifties or low sixties Seemed not sustainable for those states. Anyway and i think that's crazy story. Those states so i mean california is they are. Have we have out of control spending san francisco out of control spending and then they wanna layer on top of this higher taxes in a dysfunctional society. Makes no sense you you let me just answer real fast. One of the great things we have is fifty states and will be some canaries in the coal mines. That wheel annoy i. I fall under the weight of ridiculous taxes in regulations overspending and so. Hopefully people will learn from the canaries in the coal mine won't happen to all fifty states. That's all we. When i was when i i made a little bit of money. I got obsessed with trying to protect my downcycle. So poor and i was so scared. I was trying to figure out where to put this money. That i wouldn't lose it. And i found out about these municipal bonds that were revenue back. And i'll say second you're saying that everybody who goes over. The verrazano narrows bridge that money. I goes to the bondholders. Who am i got. I need that bond and when they talk to them like. You're you're kind of crazy jason. These other bonds that are not revenue back. We've never had. We've never really had a major jurisdiction go bankrupt. It's happened like you know. In small towns in texas somebody has a twenty five million dollar lawsuit. And the town's only got five million dollars in revenue. They went bankrupt. But we never see these bonds bankrupt. We could see a san francisco or new york an illinois. you're saying reached reach a breaking point. Is that given possible. That major city could go bankrupt. Get out you know. I think we'll see at some point that happen and like i said there's a lot of cities and some are more responsible than others. So hopefully the canaries in the coalmine will be lessons for the rest that it has to stop. You know the the only guys who can print money are as the federal government. Young state governments can print. So i think you know the fast will come home to roost at some point for some of the more irresponsible states and cities all right. We're rounding third base here joe. You've been very generous with your time. Mr green blat. This book is incredible. It's concise can you get into one of my favorite topics another hot potato topic that people feel very uncomfortable talking about for some insane reason which is immigration and other high functioning society. And also this dovetails with pensions and savings one of my favorite places to go on the planet. Australia has figured out. Both of these things. And i was reading your book on why he must know a lot about australia. Bet because having spent some time there my sophomore in that three or four times they have some of the highest function cities the best places to live in the rankings of cities around the world and they've gotten two things right one is they force people in something called super which stands for super. Does it super annotation. Right annulation right. I think we'll see. I think you agree. And the other thing they get really well. Although it's controversial is they like canada and other people have a point based system for immigration and they really have thought deeply about immigration and who to let into the country. I obviously have to have some compassion there and then you have japan which has just like nobody can come here. Nobody can get citizenship and nobody looks japan and says oh my god. This is terrible. Societies are horrible people but here in our united states. It's become so polarized so try ballistic. You can't even have a reasonable discussion about pensions and savings or immigration. What can we learn from what australia did right. In these two instances and what should we be doing here in america. Sure so great question. So we can take on immigration. I in let's talk about in. The book is skilled immigration. Because that's easy to the business roundtable we come in second last welcoming me welcoming skilled immigrants. We only be japan and japan. That's embarrassing because japan actively discourages immigrants. And you have to speak japanese really to make it in japan we you know. English is universal language of business in science and so we have a huge advantage. There are so to come out of the second to last only to japan. Out of all the developed nations in welcoming skilled emigrants is crazy because their free gold mine If you look at the data for every skilled immigrant we take in We make between a half a million a million dollars that means we collect more taxes versus the service we give them in current dollars. We bring one in. We make half a million to a million dollars so we get audible. It's a profitable deal. It's a money making business and we not only get. Don't take our jobs. They create two jobs for every one we take in. And then and and these are the stats. It's a free gold mine. So here's some amazing stats. Immigrants founded fifty one percent of u. startups over billion dollars of twice as let yes exactly twice as likely to start. Businesses natives responsible for corner productivity growth of the last twenty years and immigrants or their children founded two hundred sixteen of the five hundred fortune. Five hundred company. Steve jobs was an immigrant's son. So those are all incredible stats. So it's a free gold mine. Were throwing it away. We came in second to last. We have this ridiculous h. Would be program that fills up in the first five days week of three times over our limit on taking people in h. one b. and there's a much simpler solution and we actually have a leg up over canada in australia. We have a much better solution than that. We're able to do than they have. They have a point system as you described. Just because you're good at you have a degree or you have some skill set doesn't mean you're ambitious doesn't mean you know there's a good fit for you with a let's be honest right. You could have bought your degree in another country and the government standards are set. That doesn't mean that they're good government standards for who gonna lead in or whatever so our system in one sense is better or he should be system is an employer wants to hire you. So it's a one to one fe. We have someone wants to hire you. So all i suggest is if you're willing to hire some if If you can get a job you're an immigrant skilled immigrant. An employer wants to get you give you a job for sixty or seventy thousand dollars a year which means you have some skill and your and the employers will not pay a twenty percent tax on top of that. Thank you take as many skilled immigrants as they want. Obviously fix solution. Obviously if you could hire someone domestic and you don't have to pay the twenty percent tax you'll doe doing your job right above the fifteen percent benchmark of meaningful to somebody right. You've got to really think about twenty percent ten percent you wouldn't think about twenty percent you got to think it through and the h. one b. visa by the way is completely forget when i was in. It they would say every meeting would occur. How much cheaper is that employees. Is it worth the five thousand dollars and then we will be able to give them lo- raises because if it's so cruel the h. One b. visa. If you lose your job you have to leave the country within thirty or sixty days. So we've created this perverse indentured servitude because these are high paying jobs and maybe a little offensive to say it that way but in way you create such a weird incentive with the employer has so much power over these it people who typically were coming from india and then americans were losing their jobs and every conversation. I ever heard on the board of a company when they brought up h bay was cost savings. They were doing it. Explicit of course if your solution takes that perverse incentive Out of it. And incentives as you talk about in the book matter so you know the people leave their countries for political freedom our safety lack of opportunity and we have those things in spades so those countries who have those things have brain drains. What's called the brain range. We should be a brain magnet. We have all those things in spades. The only thing. I would say about immigration. Is you know. Obviously what about people who want to seek refuge hero better life and what i suggested in the book is if we take him to skilled immigrants we can take an aide to it. Cost us money to taking a unskilled immigration short. And if you wanna take that money be between the extra jobs we can't bill gates said we get four. We create four new jobs very skilled immigrant. We take okay over at microsoft but if we take to skilled immigrants in and you you think it's important we should take we can take. We can afford to take eight to ten unskilled immigrants in order to take eight to ten kids. Who are already here out of childhood poverty. We can spend the money on that. And i don't want to get in that argument. All i said in the book was we should take the free money and then decide what to do with it yet. So that's hake the money and then split it up fifty fifty flip a coin and figure out how you gonna disperse it and then we have ten million people who are illegal already want. This could be a path to allowing those hardworking people who are again incredibly vulnerable. It's unfair we could work towards getting them To be Yeah so let's let's close on the 401k. Back on pot in ear. Okay to just talk about everything again. Because you are a super guest in the category of super gas like you're you're so insightful and concise with the answers. I love it when we look at. Pensions are gone. But i mean the only people have pensions. You know like firefighters and people who are super high risk burning and running into burning buildings and stuff like that. That's kind of going away. When i was in my spent my time in australia they would kept talking about the super funds a super funds and it was a little controversial. Some people like us and there were maybe some issues where people were maybe skimming too much fees and people have multiple accounts like we had a problem here with some of the banks do in that kind of stuff on the side but overall people are very calm with their fifteen. It's actually a twenty dollar minimum wage. Basically in american dollars people there are happy they gotta essentially a twenty dollar minimum wage. And they don't worry about their retirement. They feel good about it because participating in the markets because they have super explain why this is working so well and how this potential solution for us as we wrap. Okay well well. There's things we can learn from australia. They ate mostly how private savings and they take advantage over there The most important thing to have good retirement savings is to be able to use compound the power of compound interest or compound invested To get money if that doesn't work out for you because either make bad decisions or just. Investments in general didn't do well australia's supplemental system. That makes up for it. So that you end up with enough savings is kind of like a guaranteed to get your superannuation fund if he didn't save enough before he retired. Don't you off. They'll top you off. So they automatically. It's moving up to about twelve percent of what you were in social security. It goes into your private savings account. You can choose from a lot of different superannuation funds. You can do that so what i say. The bulk is people love their social security. We're not gonna stop that program so we can waste the waste a lot of time discussing how we can make a better program but social security. Security's here to stay. The only problem is social. Security is if you make ten or twelve dollars an hour You're gonna end up with about nine thousand dollars a year in retirement and that's a real problem because nearly half of all working families have zero retirement savings The median family between ages. Thirty to sixty one. Five thousand and call in retirement saving the average working age low income black hispanic or non college graduate. Have no retirement savings the night at ten families in the top fifth of income half retirement savings nine and ten in the bottom fifth. Do not have any so we need to do something. In addition to social security nine thousand is not going to cut it. no way And so what can we do. And i suggest being an investor that compounding is the answer having people start saving early with what because if you're low income you don't have a lot of money to save. You need that money to live. If you're yom which is when compounding matters i go through the compound. Interest tables into that was incredible people started early. They retire early. And compounding is such a the rule of seventy two. Like my god if you if you can compound at seven eight nine ten percent a year. Oh my lord in double your money. Every seven years yum. Well what the example. I gave him. The book is Just save you a couple thousand dollars a year and earning ten percent on it if you started at age. Nineteen put seven payments and stopped making any payments at all at age twenty six. That's what person or someone who starts at age twenty six and puts in forty payments of two thousand dollars a year over forty years. The person who started at age nineteen and put in seven payments and never put another nickel because he started earlier ends up earning more than the person who saves for forty years but started later so no investors. Those last couple of double ups are the ones that matter story or became a billionaire at sixty seven. I think or something like that last. Call those last couple of double ups really add up when one good reason to get older. I guess so yes. I've long enough to see your wealth double. So so what can we do. We people have to start saving early. How can we do that. Well i don't suggest we raise taxes any more than we have on wealthier people. But i do suggest that you know Putting into social security stops at one hundred twenty eight thousand dollars that's going up your hundred thirty seven thousand dollars actually You you'll get tax social security about that because you don't get any more money from social security. It's kind of based on the way the program was set up what you put in rhymes with what you get out if you kept taxing and to unlimited amounts of course it would do that anymore So what i do. Is i suggest that you get to keep saving if you make more than one thirty seven. These are the wealthier people get to save. But we take some off the top. We'll take fifteen to twenty percent off the top. Well let the compound with tax advantages to make up for that and we'll take that money to people who are low income brilliant young and let them start comment. That'll be a lot of money for them and let them start compounding and we can do that either by increasing the limit on 401k's where you can make it voluntary or involuntary does it. Matter is not a higher tax. it's just letting people put in war to their 401k. Taking fifteen or twenty percent off the top. Because you're getting that tax benefit of having the rest compound to win win win for needed. Give people who needed younger. Take advantage of compound. The only way out of this mess. We're not we're not going to chase social security. So i had we get those people when they retire to have money. Forced them to start saving or give them money when they don't have any money when they're young or their low income. Let them take advantage of compounding. And hopefully that'll help right bliss brilliant I love the idea. It's a win one because the person who's putting that extra money away. They're happy to give up the ten fifteen percent because they got all the other tax savings right there saving another fifteen percent. I'm sure on paying if it was capital gains or whatever you know depending on which jurisdiction they live in and then the people who are coming up short when and the government wins because they're not on the hook for managers singing. The government sucks managing these things. What about putting a superfund in parallel. Because that was what. I was thinking where were going with this. Which is hey. We're gonna start super now. Everybody's responsible for putting just one percent of their paychecks into a super and the thing with the super says you can't pull that money went out in a 401k. You can pull it out and pay all those penalties but my understanding of the super funds and australia's you can only put money out in the case that you are disabled and can no longer work or you hit a certain age correct so we could have a forced 401k. Super kinda program. What i love about the super program is the financial literacy of people in australia. Is off the charts because they have to pick their super and they're watching it so it's almost as if you force everybody above eighteen or nineteen. Who's working to understand 401k's and 401k. United when you start four one k. Program at your company. You can't force the employees to be part of it. I never understood that like we should be putting a gun to people sentencing. You have to learn about your savings. You have to have financial literacy just like you have to have a goddamn driver's license to drive a car. We let people drive cars and we forced him to go to school. And then we're on the hook for their retirements and we don't force them. Have any literacy. Sure so i love that program and you have convinced i will just say i live in the real world and not going to happen here. People love their social security. I looked at all the political discussion. Sierra and i tried to come up with something. That was actually doable. As much as i love what. Australia does as much as i love what. You're suggesting i wanted to come up with things in my lifetime. That might be helpful. In what i could see happen so You know i'm i'm trying to be real realistic with the alternatives that i suggested about if i were starting from scratch. Go exactly where you are discussing. You've been super successful in his career. you made a ton of money ton of binding you know. A i was born at the right time started in you know born to parents who were able to give me a great education. You know where we moved and born great country so and i got out of school at a time where. The market was moved up in thirteen years old and lost decades. Yeah lost thirteen years. And so i started the exact right time coincidence coincidence a lot of people i went to school with also did pretty well so i think we've done a pretty good job where we are but i have to. You got to third acting you. Think in politics we think philanthropy. What are you thinking of. You just love what you do going to work everyday. Grinding it out in the markets you got a third act. I've i've been writing and teaching for a long time. I love i love. So i'll how i spend my time i. I'm very excited about putting together program. Some doing something are you can invest five dollars a day along the lines of what i think. I've been very involved in school reform. So that's a lot of fun for you. Learn about and so you know wherever i can be helpful. It'd be fun. Politics won't be one of the places guide maybe sharing ideas and helping someone listened You know be fun. You're a great writer by the way just from one to another. Your book moves very quickly. You're sustained. I don't know if you've got a great editor or you just believe in the economy a words but this book in two hundred pages. -ccomplish is more than a lot of the dip. Shit books my friends are writing. Who have no experience in life and they spent five hundred pages wasting your time. It's intentional that you write these concisely right you you suffer over these words. I can tell yeah so much easier to write a short book. You know there's less pages in everything gal it also makes you be more simple and more direct so director writing style. I wish the only thing i got is you didn't read the book somebody else read it right. You listen to the audible. Go do that. You have to talk to your publisher. They always want some smooth silky. Talking voice over is no offense. I'm not trying to louis ankle. Your businesses voice over artists. But you should redo it with your voice when it's the author's voice it resonates so well and you get that intonation and i hate there like monotone of these like Professional voice over artist. You've got to read the next one or just read this one republican. I would have rather heard it in your voice. Because you're good. You're good podcasts. By the way. I heard office capital allocators. That's a great podcast to if you haven't heard if you didn't get enough of joel in this hour and a half go over to my pal capital allocators which is a wonky podcasts. For people who are lp's in funds like mine. And i guess joel's in its pocket the podcast ted. Great ted's awesome He was just a guest on here. All right listen joel Hopefully someday this pandemic is over in me you tad and some other folks can have dinner or something I i really was taken by the book. And i'm gonna go backwards into the archive of i was gonna read it. Your another one of your books. Which when you suggest if you're not that knowledgeable about the stock market a little book that beats the market. If you wanna go to the next level sort of graduate school you can be stock market genius. I'm gonna. I'm gonna. I'm gonna have to go to the graduate school one and try to figure it out. The market is completely Overvalued right now you think or is this makes sense because of inflation you know. It's a market of stocks stock market. So what i would say is the amazon. Google and microsoft's don't bother me. We own a bunch of those. I think those are some of the best businesses we've ever seen what there are hundreds of businesses that lost money last year and on average if he bought everything lost money last year. You'd be up almost one hundred percent this year so about all hundred hundred something of those two hundred sixty one companies that. Have marcus over billion if you bought them all that lost money. Last year the pre covid you would have been up medium fifty percent and on average over one hundred percent. So that's a little frothy. I would say that that portion of the market frothy. This is like you got that nice car pacino but they put so much froth on it. You're you might spill it. We might drink. It is really hot onto that is some analogy to that. Over frothy cop pacino. Be careful with that Yeah i would think. I love this company palatine. I don't know if you've got a peleton like love and my peleton. I want to buy the stock and was like their current market. Cap is like thirty or forty thousand dollars per subscriber. And i'm like well. I'm my lifetime. Values like ten or twenty grand at best and and i just wanna buy that stock. But i can't figure out the math. And i can't figure out if i'm an idiot or i'm a genius tumbling the public markets. Well we don't we don't how fun but we're going to get one so that's more grow. Treadmill is next level. It's got a monitor. I kid you not joel. It's it's like the size of your computer monitor for new now. It doesn't play flicks. That's one thing that i don't like about it but you drive. A tesla. assume. I do not watch foles school. What are you pushing a range. You gotta land rover seem like a ranger. An suv don't ask Porsche cayenne okay. All right that makes sense to me is abortion hannah. isn't it the. I know you gotta you gotta you gotta get the model why they electric car porsche. Experience i would say peleton is like a porsche. Or a beamer or tesla in that it just feels tight. You know like that porsche tight. Everything is in the right spot. You know you can reach the controls but yeah yeah yeah. You're you're an old school. Eighties like Wall street guy. The porsche cayenne is just a no brainer. Don't say that. Because that's what it is. I i'm telling you guys all get the bmw's and the porsche's like my my boy. Bill is pushing that borscht. Diana all right listen all. This has been great as everybody if you hear my voice. Stop what you're doing pullover if you're self driving maybe no need to pull over. I can't give you advice on that. And by the commonsense the investors guy to quality opportunity and growth joel. I wish you ran for office. Because i can't deal with the shenanigans of this car party system but god i don't know if they would you would be a democrat. I thank democrat and they would never have you because you make too much sense all right. This has been great. And we'll see you all next time.

warren buffett Joe greene gotha gotham asset management Gotham capital Ben gray Folio jones vantaa uk vanda
Vanta: Maintaining Security Standards with Christina Cacioppo

Software Engineering Daily

1:01:00 hr | 3 weeks ago

Vanta: Maintaining Security Standards with Christina Cacioppo

"Sock to is a security audit to prove that sas companies have secured their company and customer data. It's often considered the minimum audit necessary to sell software. Hip is a federal law regulating. How sensitive medical information about patients must be handled. Iso two seven zero zero. One is the global benchmark for demonstrating your information security management system. What do these three things have in common. Their all security standards that companies need to maintain renewed to be trustworthy to customers. They also take intense preparation with months of work and hundreds of screen shots to prove compliance with auditors. The company vanda provides automation tools to monitor your applications and maintain compliance. Fix items on your vantage to do list. And when you're ready advanta trained. Cpa will perform an audit with you in this episode. We talk with christina cut. Yopu ceo advanta. We discussed the accreditation process and the security needs for various companies and how vanda is helping. Keep companies in compliance. Our first book is coming soon. Move fast is a book about how facebook build software. It comes out july sixth. And it's something we're pretty proud of. We've spent about two and a half years on this book and it's been a great exploration of how one of the most successful companies in the world build software in the process of writing move fast. I was reinforced with regard to the idea that i want to build a software company and i have a new idea that i'm starting to build the difference between this company and the previous software companies. That have started. Is i need to let go of some of the responsibilities of software engineering daily. We're going to be starting to transition to having more voices on software engineering daily and in the long run. I think this will be much better for the business because we'll have a deeper more diverse voice about what the world of software entails. If you are interested in becoming a host please email me. Jeff at software engineering daily dot com. This is a paid opportunity. And it's also a great opportunity for learning and access and growing your personal brand speaking of personal brand. We are starting youtube channel as well will start to air choice interviews that we've done in person at a studio and these are high quality videos that we're gonna be uploading to youtube and you can subscribe to those videos at youtube and find the software daily youtube channel. Thank you for listening. Thank you for reading. I hope you check out move fast and very soon. Thanks for watching software daily. Here's a puzzle. What do products like dropbox slack. Zoom and asana all have in common. The answer is they were all successful. Because they became enterprise ready becoming enterprise ready means adding security and compliance features required by enterprise. It admins when you add these features enterprise users can buy your product and they'll buy a lot these features unlock larger deals and faster growth but enterprise features are super complex to build. They have lots of weird edge cases and they typically require months or years of precious engineering time. Thankfully there's now a better solution work is a developer platform to make your app enterprise ready with a few simple api is you can immediately add common enterprise features like single sign on samuel. Sei 'em user. Provisioning and more developers will find beautiful. Docs and sdk's they make integration of breeze. Work is trying to be like striped for enterprise features work os powers apps like web flow hop in for cell and more than one hundred others. The platform is rock solid fully stocked to compliant and ready for even the largest enterprise environments. So what are you waiting for. Integrate work os today and make your app. Enterprise ready to learn more and get started. Go to software engineering daily dot com slash work. Os that suffer engineering. Daily dot com slash work christina. Welcome to the show. Thank you so much for having me. You are working advanta. Vantaa is a very successful company. And what you do is around sock to compliance as well as other forms of compliance people. Listening have probably heard of compliance. Maybe they have done some work around compliance. And i have to admit when i first heard about sock to compliance. I assumed it was this thing that had been around forever. It sounds like it's old. It sounds like it's been around forever and it sounds like it's hard to deal with. It sounds like something that is difficult to deal with. And so my first question is why didn't this exist earlier so you start advanta. Four years ago this seems like a product that should have been around for a long time. Why wasn't it around when you start advanta. Yes great question. So backing of advanta is a security and compliance company. The joke that's not a joke at all is that we're a security company masquerading compliance company and got into these compliant standards as a way to help companies prioritize and improve their security and particularly the way we do that. Get them these compliance certifications that when they have them opened up. New markets helps himself. Astronauts bentley grow their business and even the why not why now question about santa is a really good one like you said started advanta basically early twenty seventeen. Why didn't this exist beforehand. I don't actually have a great answer. My best anti which. I find a little unsatisfying is when you say the word compliance or sock to to an engineer or a product manager. They will generally run screaming from the room. And they'll be like oh. Don't you want to work on this project. And they will be like right. What else do you have for me like. Can i please. We're something else and so a lot of this stuff just didn't get looked at by engineers product people and i think we looked at it and initially had the yellow thread screaming from the room. This these the way you do this generously stuck in the ninety s less jenner's still you could probably say some other things but looked at it and said well. Can we fix this right. Can we standardize. Can we productized and sort of went from there. But i think that sort of insight hadn't happened previously just because folks who again have the sort of skill set usually compliance. It's not the top of their list of things. I want to work. Okay no because. I have run screaming from the room for six years since starting this podcast every time i heard sock to. I've never asked this question. Can you tell me what it actually is. Yes so okay. Really high level. It's it's a seventy page. Pdf that has to detail. But basically says hey we had someone who's really rigorous and thorough. Sit down and talk to us. We explained all of our security practices professionally skeptical. We proved our security practices to them and they signed off and think we're reasonable so you potential buyer of my software should also think are reasonable. And if you'd like more proof here's my seventy page. Pdf with lots of detail on how this whole process worked. But that's what it is at a high level. I can go into kind of different different versions of it. But that's sort of the value in the market which is which done well. I think it's actually a useful thing right building software selling software. There's just more and more concern about data security and privacy and this is one of the things that underlies kind of bantus founding story as we looked around. And we're like okay. Are people going to be more concerned about. Data security and privacy in the future or less right is a good trend about on. We started absolutely more. And then you're like okay. Great whenever a business by software are they going to go do this full investigation and audit. Make sure the data's handled well and everything setup reasonably into and his every business going to do that every time they buy software from another business. And i have a becker economics. I like efficiency. Broadly detroit fully. I don't think you have that to look at that and be like i hope you know. Not everybody goes and investigates everyone else gets a tremendous amount of time and effort and so having a centralized way to say. Look one trusted party check. Advanta said they're reasonable so other folks can trust fanta given the depth work. This person did. I think is a reasonable system. This is what sock to purports to be right. Well said now when. I look at what you actually have to do. I imagine you go into these companies and are looking at their databases and making sure. Their databases are encrypted. And that you can tell me what else it actually would. What else sock to compliance actually entails in terms of boots on the ground but it sounds like a problem that at first glance looks like a consultancy problem like you. Ha- you hire a bunch of sock to consultancy experts. They parachute into a company. In the analyze every angle of the company to ensure that everything is encrypted where it needs to be that the you know the the pipes are as secure as they should be. How is that a problem that you can productized scalable way. Yes initially to your mic databases encrypted. This is one thing you do an again. You can kind of think of the checks that make up a sock. To or say a hundred things like that so are your databases encrypted our folks laptops encrypted password manager people on boarded to the right systems and off board systems. Whatever just like a hundred things like that and your consultant points a really good one in two thousand seventeen when we started poking around here and talk to folks like you. How would you practice a sock to step. One is sort of look deep inside your heart and develop your own security practices right like how do you. How do you productized that. And we saw that and mostly we were just kind of confused and very naive right near like well. I can look deep inside my heart. But i probably shouldn't i should probably just follow the best practices right so actually really core to vanda is a prescriptive set of controls but just things you follow right and one of the first things we did. In early product development was write down a list of. Hey here's a hundred best practices that we think company should follow and then that became the core of the product. Today you can add and remove things on the edges but a key piece of moving it from something. A consultant does to something. That's productized is taking an opinionated stance on. Hey here's what reasonable security. And here's what reasonable best practices look like in twenty twenty one club software company. I think four years ago. I didn't interview that really stood out to me. and that was orioles a series of interviews. I did a series of interviews with stripe employees. I think it was about four years ago. And i remember talking to at least one of them about sock to compliance at stripe and it sounded really hard. So i'd love to know how you would direct an engineering team to become socked to compliance and go deeper on the kinds of tools that you could potentially present to an engineering team. That would make their lives easier. Short well first. Deputy fanta no but more seriously so the first step of any for us infanticide is to decide on the list of things you want to implement and no matter what standard record talking about sock to but all these standards have really high level guidance but one thing we found is a guidance in fact really high level guidance says things like we keep customer data safe. That's kind of beginning of end of it. And so it's up to the company to say okay when we think about keeping customer data safe rate we we think about encryption in transit rest we think about rule of least privilege around employees accessing. It we think about you know several layers about that occasion for an employed access to customer data. Whatever right and the first step of one of these processes is kind of figuring out how you want to define. We keep customer data safe for reasonable. We hire good people and again. This is the van to take. But i'm actually biased in that like it was take that we thought was so good that we put into software was one of the things that has made these projects hard for historically for small or large teams can like when they're talking about is the feeling of. Oh my gosh. I have to go out and do this. Giant research project and figure out a point of view on all these things. And i think here's where kind of sane defaults and best practices can really be your guide and so if you're a company that has strong engineering practices in strong engineering fundamentals. You're probably doing a lot of the stuff you'll want to do in need to do and really optimistically. Some of these compliance projects can end up being fueled a prioritize. Some of what. Maybe you've wanted to do so. Maybe we dropbox example. I think dropbox got to a couple hundred engineers without mandatory code reviews and then there was some amount of desire for mandatory code reviews but it actually ended up being a compliance project. That said like oh. You need multiple improvers for something today. That really got the team to make that process change. and so i think yeah optimistically. Some of these compliance projects can a team can use them to prioritize and get implemented the best practices they want and to kind of look at it. Look at the project overall that way versus like. Oh my gosh. We have this absurd checklists. Someone's gonna you know. Come in and make sure we stand on our heads on tuesdays and isn't this dumb but really kind of seeing these as you get to write you. Write your rules to write the rules. You want like used this. As an opportunity to bacon the security practices you actually think are reasonable for a company of your size. Yes you mentioned dropbox. You worked at dropbox for four years before we started in two zero two years yet. Two years okay right. So dropbox of course has a plethora of security challenges. And i'd love to know if you're or to what extent your inspiration for santa or your your strategy around fanta was informed by your experience at dropbox so it was so. I was a product manager at dropbox on dropbox paper to their version of google docs and online collaborative editor during the team. With five or six people in the product was on launched so super early and as we were trying to take it to market one of our initial ways of getting users was going to the account managers at dropbox. Kinda the the folks who worked with the existing large customers and just ask them to start giving away our beta to. We've been called debate. I just start giving away dropbox taper to these customers which the account managers who are very excited about because they spend all their days calling up customers at asking them for more money and i basically went to them over lunch and said hey can you just you know. Have them try this thing anyway. That's how he got her first users on paper until the dropbox legal team learned what we were doing and got reasonably very upset. Get smart people during their jobs but they sort of came to us and they're like hey you're going after all these big customers that have contracts and the contracts say dropbox is secure and compliant and pen tested xyz and abc alphabet. Soup and dropbox is but paper is not so you either need to fulfil these contracts or stop doing this like eighth app and you know we sort of determined to note. The words meant like do physi- pm. It's like oh well you know how do we do that. And we went and cost it out and found out. I would take about eighteen months to go get socked to do all the things contracts wanted us to and again. We were like five. Six engineers didn't have product market fit. Where are we going to put everything on. Hold for a year and a half and go do this project like and then wake up in a year and a half and be like. Oh now i'm going to go. Try to find product market fit. Hopefully that works right like no so. We ended up doing from go to market. Perspective was took paper to market without would actually with blocking access to anyone a dropbox contract so that was a rough strategic choice. But i think it came from being like look. This is dropbox twenty fourteen. Twenty fifteen the height of dropbox power. And it still takes us a year and a half to do all this stuff like what is going on here. Why is it so hard and some of the starting to dive in and see like how bespoke a lot of it was and how mean rooted in accounting. A lot of the standard was not in software. Engineering what you're describing is a proxy for what a lot of companies deal with which is a point at which they need sock to compliance in order to reach a new tier of contracts basically like there are there is a category of customer which is also some going to be some of the most valuable contracts that you're going to be able to close that needs sock to compliance at and beyond that point i mean you can be slack and sell to startups all day long but eventually you're going to be selling to banks and then you're going to need sock to compliance. Yeah and this is one of the things that we actually quite liked about. It is our basic thesis like look the poll to get a sock to to. Your point is really strong. It opens up new markets. Gross your business. It takes you up park it right. It does all of these things that are like board level topics where you know the company is like. I want everything i just said. And so the pull the get us up to really strong the process of getting a sock to and depending on how you do it some of the processes that result can be. You can take a tremendously longtime. It can feel like a ton of overhead. It can be really frustrating but people still do it because again the the poll is so strong and so we sort of looked at that. And we're like okay. Here's something that companies are going through even though they really don't like it terrible process etc. Can we change that. So it actually net positive to the company's operations and security and will they go through it even more man that was against some of the origin of vanda of like can. How can we take this hair on. Fire problem Orienting it around what. It's designed to be oriented around which is demonstrating the good security practices accompany has just a pause on fanta for a moment and thinking more about dropbox. I think dropbox as a company who their core product has been so successful that they have been able to double down on their core product while also experiment with other products. Now kind of making a second product in a in a very successful company is notoriously difficult. And i wonder if you have any lessons of innovation around like seeing dropbox you know the the spam time we were there twenty fourteen through twenty sixteen. I think that's right before or around. When they started the magic pocket project. Which i would say has been one of the most successful major Projects they've done not a lot of people know about it but this you know this re platforming that that totally changed their cost structure and give them all kinds of future proofing. I think is really cool. But but aside from that internal innovation. There's all lots of outwardly focused innovations like paper and mailbox the mailbox acquisition. Tell me about how dropbox informs your long-term product thinking. It's a great question. So i joined dropbox in two thousand fourteen again. I don't overstate by roller impacts. Like i was. Pm i was. You know certainly not anywhere near the company's leadership team. So i'm just gonna talk about what kind of things i saw but i think twenty fourteen. The writing was a little bit on the wall of consumer file and can share with going to be offered by some of the major internet companies apple google microsoft for free and it accounted for the time a tremendous portion of dropbox with revenue kind of still did and that business was growing. It wasn't slowing down until it was really interesting thing to watch where again there is literally hundreds of millions of dollars that almost an increasing pace being made from the business consumer files that everyone was pretty sure would look different in somewhere between five and ten years but didn't really know what and so again this interesting time to be there because it felt like both the business was doing very well. And there was this kind of impetus to to try to find second or third product and so whether it was an extra i think in this with pre my time so again i don't want it to zero credit for this but i think what they did was they looked and said. Okay here's all the files that are in dropbox. Can we build applications around them and you get something like emails with mailbox. You get something like photos later. A photo product. You get documents and you get paper right. And so it was sort of the strategy of okay. Files might be going away. But these kind of core primitives are still there and can we own the experience around those and so we had a paper as one example. I think drugs did so. This is that as a broad strategy piece. I think the other thing that was sort of interesting. With some of new product initiatives at dropbox were sort of homegrown. So hey we're gonna put a team of four people over here and you know. Have them think about chapter documents or whatever it is some were acquisitions. So milwaukee a notable one dropbox paper the core of that actually came in through an acquisition of why start startup called hack pad and i think it was all just interesting to watch those. I think from a platform engineering perspective. It was really interesting to see a trade off so again something like paper which part of why we had. The security and compliance issues is because we were on the original startups code base. We were totally separate from the rest of dropbox which for the most part was great because dropbox at that time was like a ten year old monolith that had like hundreds of engineers and brooklyn builds and right like everything that comes from a large fast-growing engineering organization was we had this startup code base that we could move a lot faster on. But that didn't have the security compliance privacy safeguards. So just that. That's what i think the answer. Your question about lessons learned. I think they're something tied to take advantage. As i think it's actually will twofold one really important to build a sort of second third act muscle in the company right so even if your first product has product market fit and successful like kind of no technology company has just just survived on one product. And so you really need to figure that out. And it's actually harder to figure that out the longer you wait culturally for a million small reasons. And so i think dropout rate driver could. It's tremendously like just fantastically successful. First product like the true story of you. Put something on hacker news and like ten million people downloaded right and that doesn't happen. It happened to drew and then then it just started kind of printing money in a lot of ways right and it was truly incredible. And you know. I mean that has it is it is a multi billion dollar business right based on that it largely rights. It's tremendously both skillful and lucky. I think one of the things that does push on is it. The didn't need to develop a second product for a really long time until by the time they were trying to build that muscle it was within an organization that was very good at at kind of serving the first product for good reason but kind puts pressure on figuring out second products early on today. Sponsor is data dog a monitoring and analytics platform for cloud skill infrastructure and applications data. 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What you're describing there with the the second and third act muscle. That's one of the most interesting things about the companies that that seems to be perennially reinventing themselves is they have this systematic means of innovation and obviously like as start up. You don't have the bandwidth to think about that all the time but keeping it in the back of your mind knowing that your options are open is really important. Compare i mean this is no insult to dropbox but the name dropbox is arguably a little bit limiting. Like what are you. What are you building building a place to drop your files in. That's that's great. It's fantastic the name vanda. I don't know what advantage is. I couldn't tell you what advantage would be if i saw one. You know like so you are in the llama. Yes no it doesn't know what is advanta. Means advantage and finish mostly is a word we liked is really kind of the true story is a word we liked a dot com. We could get for the price of maybe a small car but not a luxury vehicle. Some domains cost okay. So as as far as your second and third act strategy you have some obvious. Short-term expansions to hip a- compliance other forms of compliance. But i imagine that the laundry list of compliance things that you can work on is has some boundary right. Where do you go from there. Yeah so i think a lot of this is also when you think about second and third acts of what at its core. Is the company doing right. And so advantage core we think about we ingest configuration information from all sorts of systems cloud infrastructure. Hr mobile device management laptops like identity providers and check for configuration and miss configuration booth within a system or all your databases encrypted jerry ws point earlier and across systems. Sally just during the company as a new engineer does she have access to what she needs to whether on an account level or like her. Ssh cues on our laptops level rate. That's advantage does. And then we can combine these checks. We can bundle them into something that will get you a sock to or get your hip or get you a name your alphabet soup certification right. We can also bundle them into like. Hey you're just starting out and wanna make sure you're being baseline reasonable. Like not a doofus. Right what should you do. And so i think in a mantis sense like you'll you'll see us take the checks we'd do. I mean expand them breath more of them excedrin then bundle them in various ways some around what we call recognized compliance standard. Just like the alphabet soup of stuff and some around things we probably create a just different price points all the way through interesting. Okay well what about. From a management point of view how has the expansion into different forms of compliance affected the management structure of the company. Well yeah. I think it has forced us to amin kind of play by our own rules and be a little more standardized rate the product that we initially built and sold kind of almost up until today was very socked to focused. We just encoded a lot of assumptions of like osaka. Needs you to do the things. So that is written into our code thing and a lot of the last six months has been pulling back in generalizing right and saying okay. You know sock to this hippo on that rate and so i think moving into different standards for us in these different products has sort of been the just forced us to generalize what we're doing and think at a higher level think a little bit at a like model in principle in sort of in variant level and then you know go and we have two sock two things whatever but but have those been no more. Special like sucked. Two concepts are not first class citizens of our product today. They used to be right just because it was an mvp. If that makes sense gotcha. So i imagine there's significant overlap between these different policies. Like i mentioned hip and twenty seven zero zero one and sock to all have similar constraints or maybe other new things that you've had to build in order to to have the compliance protocols for the other domains yes so definitely new things to build but there is a good amount of overlap. I think when we first started looking at this market a few years ago we learned that. Actually the mapping between different standards so you know suck to section two point two makes you do this and you know eyeso- annex. Whatever makes you do that. That mapping that spreadsheet mapping is actually. What a lot of the audit firms think of their ep which is interesting from a software perspective right because i'm a software perspective. You're like that's not quite information. Should be free but like that doesn't seem like the most sustainable source of ip or competitive advantage. But it was just. I think a difference between the the kind of services mindset and more of a software scaled mindset. Anyway all the one of the things we have done behind the scenes is map different parts of the standards to each other but also take kind of opinionated stance of again. These certifications are really high level but like what sort of best practices from software engineering. Can we apply to them. And then we're does it. Apply across different standards. Yeah so the whole reason for this compliance world is i should just ask you i presume that sock to compliance is in some ways about liability protection. So if i'm a bank. And i wanna use slack. I'm gonna be communicating very sensitive data across slack if slack gets hacked and my banking chats get leaked through slack that could potentially cost my company millions and millions and millions of dollars therefore it. It's it's probably really important for me as a bank to make sure that there are some policies in place for making my data safe. I for all i know. Maybe there's even like insurance that the bank needs to get that's related to being sought to compliant. What does it actually mean. Like if i'm if i'm operating a bank and i'm looking at the vendor marketplace and i'm looking for places that are certified with your lama logo that have socked to compliance imputed by that that circular logo advanta. What am i actually getting in. Why am i getting. Yes if you're if you're you have a bank. Some part of organization is like right like risk mansions probably lives under the sea. So but is and they're thinking about risk really broadly some internal external but one part of extra no of vendor management. I don't try to stop using all the gartner words. i know. there's a lot of them but basically someone that bank is responsible. It's like okay. We're gonna share customer data with some of our vendors either because like our vendor. Is you know microsoft and we use office three sixty five and like there's customer names in spreadsheets. Right or there's some software vendor we tech method or customers and so we're twi- leo and customer phone numbers. Whatever it is even if you're a bank basically impossible today to operate a business without giving some amount of customer information to some sort of software vendor and one of the things i think especially seen over the last few years is like when a vendor gets breached the company basically gets breached. Even if that's not true so in targets air conditioning vendor whenever it was gets breached target customer information goes out the window and target customers get angry at target. They don't really get angry with air conditioning vendor right it's on target for being like why did you trust these untrustworthy air conditioning. People also why did you give credit card data. Your air conditioning vendor separate separate practices question there a real story by the way that you're referencing right like yes people most of them. Yeah this is the case. Where basically what is it like targets point of sale systems were hacked through an aircrash at through air conditioning was it was even with an air conditioning of something. Like if something literally your humidifier or something yeah yeah somehow the networks were connected right and you know there's stip want you're like why. Why was that true. But given given it was true right. You know this was. Yeah targets like subcontractor subcontractor rape targets. Customers didn't care they're just like target my credit card number. It's now on the internet. Like i want credit card. Production dented stuff. So like this is. This is kind of the world we live in. Where even if it's not you and it's your vendors it doesn't matter it's basically you in the court of public opinion and kind of the court of customer opinion. So that means there's someone at these companies saying okay. Can we trust to this vendor here. Conditioning vendor software vendor whatever can we trust them and kind of going back to the beginning right like the semi really broadly. There's kind of two ends of a continuum of how do you decide that one is. You're like look somebody. I think is trustworthy trusted them. So i'm just gonna like chain chinatrust. Trust believe it. is this kind of more. the sock to stance a sock to auditor. Said it was okay. So i'm gonna trust them or there's you know trust no one and say no no. No i'm going to go really deep. I'm gonna show up in this vendors office. I'm gonna go interrogate their executives. I'm gonna look in their eyes and see if they're reasonable people right and what to do and then there's obviously a lot of stuff in the middle there but that's what it is. It's like how much how much effort is at the bank. Going to extend figuring out if a vendor is trustworthy and how much are they going to rely on some sort of third party fanta sock to auditor. Their friends bank whatever. It is so what happens the day where target is now buying vantage certified air conditioning software and none the less the air conditioning software company makes some kind of data breach mistake or some kind of mistake that leads to a data breach and now the onus is on vanda so the air conditioning company comes to you. Well actually air conditioning. Companies still doesn't care target. It comes to you and says hey what gives what gives in and you have to say look. We inspected them as best. We could back in. You know twenty twenty one but you know the twenty twenty. two data breach was just. It was kind of using outdated compliance certification. I'm sorry yes this. Is this good. This is the way the world works today with anti but with you know suck to audits right. And without naming names basically any company that's been headlined and breached was sock to audited and a lot of it was like look. They were good when i checked. I checked somewhere we. I didn't check today right. I checked six months ago. And so what. Can i tell you i think that is i mean. It's really easy to criticize. But like look when it's a services business and humans are doing the checking that is close to the best you can do. If you're advanta right. And thinking about bam to certification we think about this in a continuous suffered powered way and so we don't have this product out in the market yet but the way we think about that is like yes. Let's say they had a security status page. Can i don't know if this is quite right. Form factor but it's to easy to visualize right and we imagined something where companies like. Look this is my security status page and maybe just like a optima monitoring status page. Sometimes things are up and sounds like not everything is nine nine one hundred percent but because we're checking with software we can basically provide real time insight and so in that case you're like look target three months ago. Maybe everything was green but yesterday things were orange right because certain security controls were not in place your proverbial internet set up a new database. Where things weren't configured correctly. You know like new employees on boarded didn't right up. Whatever it it's right like lots of stuff happens. But i think the real time continuous monitoring piece and just providing dashboards of this information is really powerful. And i have that alone is enough to change a lot of behavior you know and again when you know the auditors coming in things will be in good shape and so. There's a little bit of like well. How can we simulate that all the time and in a helpful way to security. Not in an onerous way gotcha. I still don't understand how much you can instrument this like. What are if i'm trying to. Let's say i want to install an agent again. We don't have to tie ourselves to this form factor. But let's say we want. We have this agent. I'm is a very common pattern in like monitoring software. You install an agent on your different services and your agent does something like watch. Watches the latency for all of your requests and responses and can give you information about that. Is there an a model for developing an agent that ensures compliance fell. There is actually gosh. Probably six or seven years ago. I think facebook open sourced project query which basically just it helped facebook used it for their own internal server management and getting kind of metrics analytics performance off of servers in their fleet. Sort of let them query across a large fleet of servers. Think the original use case again was sort of monitoring and performance but folks have built on that project and the queries that are run and sort of use them for security too so like who has access to this machine. How has access enabled right. But again i think the agent isn't as much the point there. The the useful part of the agent is. Hey i've got this fleet of machines. And i wanna know how their setup. How do i figure that out. In a quick and scalable way and putting an agent running something or his career something else on it. It's one way to figure it out. But i think actually the the higher order bit there is just. What's the state of these machines right. Who can log into which one you know. Earth strange ports open on any of them right. Like sort of what's going on and that insight is sort of the first step here. Does that make sense. It does in fact we did a show about os query. Not too long ago. There's actually a company around query now. Allied yeah i was gonna say upticks. Okay maybe there's multiple interesting so i don't know how much detail you could go into. A watt wise os query potentially a foundational technology around automating compliance. Yes so i think if you few reasons why we liked it one just that it was open source rate like no one likes installing agents on their machine like no one thinks it's selling software. They don't know that's totally in a blackbox on it. To just the fact that the sufferer itself is open source. I think helped a little bit. Still have objection of like. What are you running machines and are you going to cost me a bunch of money or slow me down or coughing performance issues right that that's still there but just having the code openness helpful and again the other brady mean in some ways again you can think worse query has just like the way we get an api to bespoke servers right. If it's aws server we can use aws api's to query setup configuration and reason about it. It's a bespoke machine os queries how we have api quote unquote metaphorically to what's going on. But that's the key part for compliance because it just a lot of compliances. How're things set up in real life. How do you want them to be set up. Ideally your controls cool. What's the delta right. And so agent technology oh crew and others are helpful in the power thing set up rome. Yeah you another dimension of this. I don't know if. I don't know if you've talked to anybody about about this. But there's something in coober netease world called the operator pattern so coober netease is this newer infrastructure platform thing and they. There's this thing called the operator pattern where you can basically pro grammatically describe where you're trying to get to declare actively describe where you're trying to get to and whenever you drift off course from that for whatever reason. The system tries to remediate that. And that's that pattern has been useful for so anyway. I think it's it's actually something. I mean not the only metaphorically similar not actually similar but we really encourage customers to use infrastructure as code tools tariff on cloud formation. Whatever right but it's getting to a similar idea of like declare the world. You wanted to be figured out the configuration. You want write that down. Go apply that everywhere and go from there and then from a compliance and audit perspective one. You're actually pretty good way to reason about like well in this file. I said i wanted databases to be encrypted. And so in fact they all are and to auditor really love more than one person doing something. So if you're clicking around and like an aws console just one person clicking around and like are you gonna make a video of yourself clicking around and show it to the auditor like that's weird right but if you're writing stuff down in like tariff foreign file and the code review that gives you two people into the auditors like yes jeff road christina code reviewed it to people saw the change. I like this change much better. What you build and where it takes. You shouldn't be limited by your database cockroach. Db helps developers build and scale apps with fewer obstacles more freedom and greater efficiency. So you can forget about the database and trust that it just works kuban eddie's friendly open source an indestructible cockroach. Db makes it easier to build and scale apps. It gives you the freedom to serve your customers anywhere and it's backed by world class documentation and dedicated support discover cockroach db the most highly evolved distributed sequel database on the planet kuban eddie's native and built from the ground up to help companies of all sizes scale fast. Survive anything and thrive everywhere. Sign up for your forever. Free database and get a free t shirt at cockroach labs dot com slash sl daily. Are you building cloud applications with distributed team checkout teleport an open source identity aware access proxy for cloud resources teleport provides secure access to anything running somewhere behind nat as h servers. Cooper daddy's clusters internal web apps and databases teleport gives engineers superpowers get access to everything via single sign on with multi factor list and see all ssh servers cooper daddy's clusters databases available to you get instant access to them all using the tools. You already have teleport insurance. Best security practices like role based access preventing data exfiltration visibility and ensuring compliance. Best of all. Teleport doesn't get in the way. Download teleport at software engineering daily dot com slash teleport that software engineering daily dot com slash. Delamore cool. so now that we've talked about what your company actually does. Let's go into management a little bit or strategic implementation. Give me a snapshot for where the company is today in terms of headcount and how you're allocating resources and what your prime directives are. Yes so we are about eighty people today close to fifteen hundred customers. Roughly half engineering product design half go to market moving toward that can talk about any piece of that of helpful. And then from a strategic point of view the company strategies. Pretty pretty simple. It's us what we call recognize compliance standards sock to hit by etc to build our product our technical capability and our brand honestly to have conversations to introduce what we call santa verified but a continuous standard right. So something that is not open to check three months ago. So it's probably good but it's like vantage three minutes ago and here's the real time dashboard. So it's we're moving toward and that's you know. We tried to actually do that in the very early days. We tried to walk around and give people into dashboards and mostly what we got back from. Startups was this is cool but no one wants by international. They want me to have a sock to so. Can you help with that. And so the whole kind of company premises like yes. We will help you with a sock to but we do not to yourselves that they suck to company. We see ourselves as a company that is using sock to to build the credibility and brand and capacity to actually have a continuous verification of software security. So everything we do oriented around that so in the long run you see yourself more as a security company rather than a compliance company we do. Yes yeah again. It's compliances like the purchase trigger. Get people to care or not really care people care but it gets to work prioritized right because walking around in the early days we'd walk up to cto that startups and be like. How do you feel that your company security and they'd be like could in some ways terrible and others red cool can we. Can we help you like. How can we help you make it better. And they would say well step one. I have twenty other things on my list around unlocking new business growing customers to like ben ikin right around and worry about security and to again the insight was. Can you use one of the things that helped someone grow their business compliance certifications to help them prioritize some of the security work that they probably wanna do no. They need to do just hard to prioritize fast growing startup when you're coming into a really big market. It often helps to have a really differentiated entry. Point and you have a differentiated entry point. So you're entering a secure in the in the long term time horizon. You're entering a security market from a compliance standpoint. How does that impact where you guide the company so a few things one. Our point of view on compliance is and sometimes a little bit of a push poll with of our audit partners but like fulfil our vision. It needs to be rooted and engineering. Best practices right and so when we think about what are we recommended to a company like we will recommend code review but that is because it is often eight. Good engineering practice. We will generally not recommend keeping the fire department phone number on file. Ray leaguers something you know. Pick your old antiquated compliance thing right. So there's a lot of orientation around what are the again. What are the software engineering. Best practices on twenty twenty one. I think even the push with that right because some of the audit partners we work with are more up to date with software engineering twenty than others right like some you know containers are still like totally for it. I don't know the thing you get them. Put your food in right and so you know striking that balance for them right. There's some amount of education and some amount of here's the thing is here's why you only need to check one of them. You don't need to check all forty thousand of them right things like that. I mean there's there's a lot of education around suffer engineering. We ended doing. So you see you've eighty people at this point and remind me is is there a heavy manual component to a an engagement with a customer. Is there a lot of kind of customer success or consulting style work in the product strategy today so we do have a bit. I very much do not want to charge for any of it. Because philosophically i think of you know the bit of that that we do as things we do as we continue to build out the product and so i do not want us to get used to consulting revenue professional services revenue or anything like that but i think one of the other parts sort of mentioned a few times. We have customer success right and customer success team. Being sort of twofold product focused right product success. How do we get you set up. Understanding what the product is going on that front and positioning. csm's truly as sort of security and compliance advisors. So able to sit with the start up and be like. Hey where are you selling. Are you selling to. What are people asking you for. Getting questionnaires right. Sort of being able to guide them there again pushes on the education piece because we need. Csm's to to be able to understand this stuff for technical audience. I think the other part is were not an audit firm we work with auditors and some of those auditor right those auditors still operate services businesses. And so they do a bunch of set. What i think is software person would look at it and say services work they do because we share a customer relationship and a lot of cases. Cool so as you're going from this coming customer success model were customer successes on the critical path to envision where which which would presumably be more automated more software focused. What's your hiring strategy. Your headcount allocation strategy between those kind of two divisions of the business between like success then engineering. Yeah i mean. Overall like eggs engineering to be a much much larger portion of the company. Today you know for all the reasons that everyone knows the. It's generally easier to make customer. Success hires than engineering hires right. So in the past we have been like okay. We're going to do this. We're going to do something manually. It's going to take more people. We're going to know it's manual. We are going to write down what we're were doing so that we can turn it into code but i guess in that sense in shorter term having customer success prototype product initiatives right because again. When it's like a process in a google doc and your people running it you can change in iterative on the fly and figure out. Oh this how on boarding actually works when you do things in this order of people understand them. Whatever it is you know how to actually explain how to choose an auditor in which one to work with and then you can hand that to engineering and say okay. Here's what we think the order right and we still want to maintain some flexibility in iterating today but we have a stronger point of view on how this how we want this product experience to be and to in the longer and then just in the longer term like anti fundamentally technology company and so joking but not everything's prioritization. But i do think we can solve the vast majority of our problems with software. it is just. How do you prioritize what to build and win question. Can you tell me about the technology decisions around the company. What are some sas providers or infrastructure platforms. That have impressed you. What are some engineering decisions. That the company has made build versus. Buy things like that. Yeah i mean. I think we were founded. We really started to building banta kind of late truth software late twenty seventeen right and so we've bought a lot of we never tried to roll around metrics framework or anything like that the way that sounds goofy to me today but ten years ago people were totally doing. Let me think what are we. I mean you know built around. Aws i think that was you know. No one gets a little bit of knowing fired for buying. Aws right and they will just have everything. I think the places where we probably ejected from. Aws or more interesting right. So we started using cloud watch metrics and then realized outta dog existed and just like how much better it was. Right until now convo. Logging and monitoring runs through data dog infrastructure product et cetera. There's a ton of instrumentation in the learning. Their early users of tara form like that was almost from day to it was exceedingly frustrating to set up. And then you know once you have it set up. It's your life is a lot better tunes like most folks tara for him stories. We are database to this day is mongo. We used it initially because it was easy to set up for a prototype always intending to switch it out to a sequel database. And then you know you sort of never do those things. If something takes off right you always have products interest to build. And so maybe a year and a half ago we migrated to atlas versus self hosted mongo into better having a team. That's not us you know. Maintaining it like that was by the way even though i will say even though mongo is a sponsor of software engineer or at least a pass sponsor. I'm not sure if they are right now. But i will say despite endorsement moving to atlas has been really interesting for us. It's that tool alone has given me faith in mongo. Db as a company. Yeah you know. And i think even some you know some part of the package right we got like some number of like solutions consulting our go use this and of course we did was like really helpful. You know so trusting them to run mongo not us because so so many startups are like okay. I'll start on mongo. And i won't among those the easiest thing to use the java script of databases it's great and it always hit some skill ability problem. There's a holmium around this the mongo db wide-scale thing. Everybody has their problems with mongo db. It's kind of a hilarious meam industry. Yeah i mean the front end has always been react probably uncontroversial in two thousand seventeen when we chose it and it's super controversial now but like you just get all of the nice things. The graph l. layer. I think we've found is a little very different paradigm for folks who aren't using. We're using it but when you use it correctly not when you like basically build it like when you build a rest. Api on top of graph q. L. it's like just a worse rest. Api but when you actually use graph q. Ellen aggressee way you can kind of get some neat things. Need properties should companies use graph cue from day one every company. Oh god i don't trust myself on this one but like probably yeah but i think he just want to indoctrinate everyone in like the g- rescue a way of thinking or i engineer robbie wrote a document called design of graph. Joel that is mandatory. Reading for every new engineer hacking higher. Advanta and i think you know. So that's that was actually really helpful. So one thing. You should definitely do to your job square point as we started in javascript in than in like and i think it took us four weeks which retrospective insane but it took us four weeks to switch type script. Every company should use type script. If you're use java script every company could use something that is typed just like the number of bugs we had just on the front end. And the moon reunified types across graph. You'll between front end and back end. That just made life so much better can imagine dealing with that complexity. Light would be like now. Every company should definitely do that. Okay great so let's beginning to wind down. Just one final question about your background. So i look at your background. Which back in two thousand ten more than a decade ago. You were at usb which is one of the best Early stage investment firms. You were there for about two and a half years and then your career just basically looked. Looks like you were kind of wandering for a while. You know you were professor and then you. You started a labs company and then you were to dropbox for a bit and then you started a unicorn. So how'd you get from wandering to starting a unicorn you know no wandering but i think that'd probably is what it looks like. It's too late. So not know. Richard camping on it to little richard hamming hopefully wandering with like some amount of purpose right and like his line was called frolo. Something like the drunk man will eventually stumbled toward the light. Post if you just set out the light post you're more likely to get to the light post now. Say the either drunk. Oreo super determine walker but ours at usb really liked a lot of the job but fundamentally wanted to be one of the entrepreneurs coming in and pitching couldn't code at the time wasn't technical didn't feel like a software company in the lots of people can't coach search offer companies all the time. I was just not someone who thought i could do that. So i took my bonus lived off at two years taught me to code. Made a bunch of stuff that of which anyone who has ever heard of but just learn how to make products. That eventually took me to dropbox in my first real job but the idea was in fact stirred a software company. It just took some amount of stumbling toward the toward the light. Post to get there okay. That's great to hear. And i'm sure we'll be encouraging to a lot of people think shorts criminal show. It's been a pleasure talking to you. Thank you for having me.

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Short Stuff: Vantablack

Stuff You Should Know

13:18 min | 6 months ago

Short Stuff: Vantablack

"Hey and welcome to the short stuff. I'm josh news. Chuck out over there and jerry's hanging around some wearing. This is short stuff about vantaa black which is pretty cool. It is And it's funny. I never really thought about variations of black until A couple years ago when we finally were able to professionally renovate our house and not just have me do it poorly because i wanted my upstairs office to be black because it's got lots of windows and tons of light and so it wouldn't have that you know dungeon like feel even if it were black right and I didn't know how many blacks there were to choose from until i started looking. It was really interesting. Yeah there's a ton and actually If you wanted to go super duper black chuck. It would've cost you a pretty penny. had you been like. I'm gonna paint this whole thing advanta black because that's an expensive stuff. I don't think you can buy again you. I don't know. I think there is something called. Vbb x two which is a bit of a paint like an actual paint that you could spray on. But i don't get the impression that that you could buy. And as a matter of fact. I guess if you would buy tried to bite you be running afoul of a license held by an artist's name nisha kapur Who supposedly is the only person legally allowed to buy Vantage black so who knows in this crazy world but a lot of people are probably like what are you guys talking about. What's so great about this van of that. it would. It would warn. Its own short stuff episode and i say to those people kick back and listen up because vantage black is pretty interesting stuff. That's right If you'd be interested in having a really really really deep black. Oh let's say one that absorbs matter now. Ninety nine point nine six five percent of light. the advanta black is for you It was i remember when this came out I think it's about six or seven years ago from surrey. Nanno systems They very much proud. Of the fact that they set a world record for their vertically aligned nanotubes array black which is what it stands for as being the blackest black of all time right and it's called vertically aligned nanotubes black because It's actually made up of nanotubes I was looking into. I was like well. How how would that create a black pigment. Yeah and it's pretty interesting. These these tubes are super super tall In there so they're vertically oriented so they're standing up on end and apparently the ratio between their width or diameter and their length is like one to one million so i say every nanometer that they are around there a million nanometers tall and they're really tightly crowded together. So there's like a billion nanotubes per square centimeter of you. Know whatever's paying advanced black and they actually capture light. The light goes into these nanotubes and can't find its way out and eventually just dissipates as heat which means that the reflective -ness of anything peanut inventive black or with nato car nano carbon tubes Like like you just don't see anything. There's no ridges. There's no depth. There's no anything it's just basically like you're looking at a void in you can see the silhouette of that thing. That's painted vanna black. Which makes it pretty awesome. all right. how about we take a break. That's a great cliffhanger and we'll talk a little bit about why anyone cares because it is kinda cool Right after this. hey everybody. Duncan is taking america's favorite coffee to new levels by offering its boldest lineup of new coffee. Choices in the brand seventy year history. Whoa i love that coffee. We're talking the new explorer batch globally source blend with smoky. Dark berry notes. Sounds delicious la la and the new dunkin midnight richer intensely dark roast with hints of chocolate. About that sounds delicious and that one is an evolution to duncan's initial dark roast two thousand fourteen to match the darker taste profiles. People have come to crave over the past six years. Yep and around it all out you can get new hot or iced extra charge. Coffee with twenty percent. Extra caffeine from green coffee extract. Exactly what we all need to take on. Twenty twenty one order ahead on the dunkin app and earn rewards. America runs on dunkin price and participation may vary limited time offer kept us off. Did you ever see spinal tap. I think you did right. Yes do you remember the the none more black joke. No it's when they came out with their black album and they said look at the cover. How black is that or something like that. And he goes. It could be none more black. And there's very subtle joke in that scene. Which i didn't pick up on until about my thirtieth viewing which is they have a record store released signing for their black album and they're sitting there holding black sharpies awesome but do it. That's great. those are usually the best kinds of jokes where you know you just have to pick up on you know. It's pretty great So we teased you with. Why would anyone care about having something that black and the original purpose of Vance black was For space travel or maybe an application on something to improve visibility of something very very far distance so think like a like if you have a telescope or something coating the inside and maybe even outside of that with vantage black it would absorb all of that light coming in. That really just takes away any glare that you can think of right exactly. So there's like a lot of scientific applications to it but if you say like the blackest black that doesn't really let light escape. It tends to also capture the attention of artists and designers of course and designers qualifies artists. But you know we like to separate them out here there. And i just did and in fact some car designers from bmw said. Hey we want to use phantom black to basically paint a w x six So that we can like look at the the silhouettes and not have to worry about. You know any kind of glare anything that they basically used it. I think they really did it. As a publicity stunt chirpy they sensibly did it so that they could study the shapes of the cars without being distracted by glare reflection in there. And if you look at this this bmw x. Six is pretty cool. The look at it's awesome. And i'm not even a car guy but i looked at and i was like that's pretty sweet. Yeah because again when you look at something like this head on its letting such a little amount of light escape that there's there's no there's no perspective or any angles or anything in it it's just the silhouette of it ideally So it is pretty cool. Look at but i saw a watch by h moser company They released the seventy five thousand dollar vantaa black walks and the the the minute and our hands are just hovering in the middle of this chasm this void. Yeah that's the watch face which has been painted in a black. It's pretty cool. It's very cool to see as a matter of fact so it's really hard to come by but every once in a while people use to should pretty great effect I'll spring for a slide whistle for you. You're not getting that watch. Okay all right for now give it. Give us a few more years. But i did research and get you the best slide. Whistle there is. It's a good slide. Whistle and i will eventually break. I know we're going to hear at this building. The suspense yeah. Yeah that's we're showman if anything For that bmw. Though they couldn't use the original of anti-black they had to use different. Arrangements of the carbon nanotubes to even get something that you could apply as like a car paint. So they had to kinda rearrange things a little bit they eventually And also something that doesn't have to be grown in a cd reactor which is like problematic. If you wanna paint a car Eventually did come up with that and like you said the thing which really nice And it's kinda like you should when you get a safe place to look this thing up it you really need to put your eyes on it to kind of see what you mean but It is interesting to see a car. I mean obviously you see a car. They use words like it disappears in. It's invisible and it's not invisible but the details are a bit invisible. And i mean. I don't know if we've said it or not. But the original vanda black was clocked in Absorbing ninety nine point nine six five percent of visible light and we lead with that. Oh we did okay. I'm sorry i didn't catch that but there so that was kind of like the The the trend that was there the benchmark that was set but apparently some other people have said we can do better than that. And i guess in september of two thousand nineteen chuck a group from. Mit did just that. They came up with a type of black. That's actually blacker than black and it uses the same technology of carbon nanotubes And it is. It captures ninety nine point nine nine five percent of visible light which makes it officially blacker than black and like i was saying this kind of stuff captured the attention of artists and And there was a an artist named oh what was her name. She's a german artist named demote streeb s. t. r. e. b. e. is did i say that correctly I might say stripper. But i don't know this way better. She took a nd two million dollar diamond and headed coated with this new blacker black. So it's like a void. A diamond voided. It's just amazing stuff to see this. It just takes over this thing in in in basically plunges it into a black hole no matter what you coat it with. Yeah and if you are redoing your house and you wanna have a black office like me. i chose one that you know now that i look at it definitely looks black but you could argue that there is a little bit of grey to it If you want something super black though. There's an artist named stuart simple as that made to matt black acrylic paints black two point now and black three point zero which apparently really really black. Yeah they are and so so. I mentioned earlier. The artist a niche kapoor. Well in each kapoor and stewart simple are in art war the good old fashioned art showdown because stewart. Simple is not very happy that a nisha kapur has the market cornered legally on vantaa black so stewart simple makes his own pigments and sells them. And if you go by them you me went and bought a tube of this This black three dot o. Today and yeah an it. When you're buying it you have to say i affirm that i'm not a niche kapoor that i'm not an associate of a niche kapoor. This is not going to get into the hands of a niche kapoor. I'm not buying it for him. you have to like click that box that says all that before you can actually purchase the stuff Which is pretty great. And i was like a niche kapoor. Sounds kind of familiar. It turns out we've actually seen his work You mean. I don't think i've ever seen his work together. at the hirschhorn museum in dc. And he has these like giant eggs and the inside is painted vantage black oak. And it's one of the coolest things i've ever seen in my life because it really is like you're looking into a black hole like if you stuck your hand in it would just keep going into another dimension is what it looks like. That's awesome it really. Is i think that the stuarts simple initia- kapoor feud should warn its own shortstop one day and let's hope it doesn't end in bloodshed. Yes let's And well since we hoped against bloodshed. I think that means we've reached the end of shortstops. Don't you chuck. Does that mean we're out short so fat stuff you should know is production. Iheartradio's how stuff works for more podcast. My heart radio. Visit the iheartradio app apple podcasts. Or wherever you listen to your favorite shows.

vantaa nisha kapur Dark berry advanta bmw chuck h moser Chuck josh jerry america surrey la la nato Duncan duncan
Justin Singer - How Regulation Unlocks Opportunity - [Founders Field Guide, EP.2]

Invest Like the Best

1:02:32 hr | 10 months ago

Justin Singer - How Regulation Unlocks Opportunity - [Founders Field Guide, EP.2]

"This episode of Founders Feel God is brought to you by Microsoft for startups. Microsoft for startups Global Program dedicated to helping enterprise ready to startups successfully scaled their companies. The program has been around for a couple of years, but I recently became intrigued when former invest like the best guest. Jeff. Ma took over Microsoft for startups provides companies access to technology including azure cloud and get hub coupled with a streamlined path to selling alongside Microsoft in their global partner ecosystem. Microsoft startup says it very compelling approach to working with startups and driving. Their long-term business value if you're a founder running a B. Two B. Company targeting the enterprise, you should definitely check them out at startups dot. Microsoft Dot Com to hear more about the program. Stay tuned at the end of the episode to hear from me and current program member abnormal security. This episode is also brought to you by Venta does your startup me to? Sock to report to close big deals or do you already have a sock to report and want to make it easier to maintain Vantaa has built software that makes it easier to get renew your sock to with vantage continuous monitoring solution. You avoid hosting auditors on site and taking screen shots to prove that you're compliant. So you can focus on building, Your Business Fanta. Partners with audit firms who file shocked to report directly inside Advanta at a fraction of the normal cost hundreds of companies including more than one hundred Y combinator businesses are leveraging vantage today to streamline compliance and focus on building their businesses founders. Still Guide Lizard can redeem a one thousand dollar off coupon advantage dot com forward slash patrick that's advantage dot com forward slash Patrick. Alone. Welcome. Everyone I'm Patrick o'shaughnessy and this is founders field. Founders field guide is a series of conversations with founders, CEOS and operator spilling Greek businesses. I believe we are all builders in our own way in this series is dedicated stories and lessons from builders of all types you can find more episodes at investor field guide, DOT COM. Patrick o'shaughnessy if the CEO of Shaughnessy Asset Management All opinions expressed Patrick and podcast guests are solely their own opinions and do not reflect the opinion of o'shaughnessy asset management. This podcast is for informational purposes only and should not be relied upon as basis for investment decisions, clients, Shaughnessy asset management, may maintain positions in the securities discussed in this podcast. Today is Justin, Singer founder and CEO of caliber foods and stillwater brands to leading companies in the cannabis industry. We start our conversation with a fascinating discussion on how regulation creates or destroys business and investing opportunities, and then go on to discuss the INS and outs of the cannabis industry. In detail, you'll be able to tell quickly how high quality justin is a thinker and operator, and you'll learn a ton about this nation business. Please enjoy our conversation. suggested. I thought that an interesting place to begin our conversation is with your prior life and this interesting view you have around changes in regulation creating market opportunities you could highlight what you mean by that relative to say new technologies creating opportunities in the early stage space or in the nascent equity space. Wise regulations. So important wonder some of your favorite examples of that I am a little odd in that I've got the classical business and legal education sort of the antithesis of what the last fifteen years have driven people. Towards, but it's actually given me. I think a much more holistic view of where markets come from. That's not inside out from a technology perspective. It's much more outside in like what else is involved in creating this market that started the initial interest was in the mid two, thousand and two thousand and I was in law school and I was looking at telecom market. So there is all the spectrum auctions going on. There was where did the property rights in the advertising time reside are owned by the content owner are they? Owned by cable provider or are they owned by somebody else? These are all big questions and they all determined both the quality of what was going to be able to what the axes of competition were and what the ultimate growth potential the market was. So you put that altogether at in a little mix of time spent in early stage seed stage venture at I ventures, and the synthesis of all that believe the best venture opportunities are where you have the overlap of massive extent demand known demand and some sort of regulatory. Unlocking event. So my favorite examples I mentioned things with Telekom, the broadband spectrum auctions back in the eighties to nineties those really opened up a whole marketplace where lots of fortunes were made lots of economic activity. You look at the version of capital gains, tax rate versus ordinary income, and you saw the explosion funds industry that comes after that. Another one that I really like is the reorganization turnaround industry where with the passage of the bankruptcy laws suddenly able to build all sorts of industry whether it was high yield debt or. Whatever it might be, but it was built on top of this platform of certainty where everybody knew how things were going to function in different scenarios. Same thing can be said more closer to my industry supplements, which for better for worse exploded after the passage of the dietary supplement, health, education. Act, to Shea back in ninety three, basically every massive market they look at you can trace to. Some sort of regulatory and locking event, and lest we ignore what's going on today I think we just saw in the last couple of months lots of people saying you wouldn't have the modern Internet without section to thirty of the Communications Decency Act. Well, I don't know that that's quite the argument favor that people make it out to be. It is an argument, an admission that regulations matter. Does it follow that VC's or I guess all investors should have an analyst just tracking new regulatory changes and serve trying to match those against demand. I don't know if you can do it with an analyst like I think it behooves VC's to actually pay attention to the whole picture I'm bear on things like autonomous cars and it's not because I don't believe the technology possible because I don't think the insurance questions answerable and I think the legal questions are answerable around it. That's not because I have some special understanding of the laws around this. It's just I have seen laws matter. Not at the margins they matter at the core technology alone never creates a market there has to be some enshrinement of the competition of that technology of the ways that you wanted to go in the law, and that's the platform which companies can stand and fight each other and develop activities. Do you need a dedicated personnel because it's also sometimes hard to predict Priori which technological changes or which legal changes are going to lead to massive shifts section thirty as like a very strange history the section that has remainder is the least important part of the communications. Decency Act was struck down. Do a lawsuit with Belfort's actually a really fun little history there. Can you describe that history? I'm unfamiliar with this entire area. So what is section two thirty wise important. What's the story there with the caveats that I have not refresh my memory on this stuff in a long time. So I might get some of these details wrong and I encourage everybody to go look it up and fat me on this but there were basically three different. Parts of the communications. Decency Act is passed during the Clinton era and the idea is the Internet is coming up we need to preserve decency. We need to watch out for porn all of the bad stuff, and that was really the thrust of the communications decency act more of like a more realistic view of how do we prevent things that might be dangerous to children from getting online as part of that there was this threat of case. Law that had been coming up though is distinguishing between the publisher in the platform trying to figure out also, there's also debates around like whether it's an interactive website or read only website law in general is always trying to make analogies to prior technologies. In prior cases, the Internet was no different especially age of BBC message boards, but would ultimately happened is then I think it was Yahoo Stocks Jordan Belfort of Wall Street's people from his firm. Were pumping up penny stocks on the forums, doing pump and dump with them and Yahu got sued as part of it that they were the publishers and therefore had liability for this and the rolling ultimately came down was no publisher can't be held responsible least. They aren't strictly liable for the content on the platform. There's more nuance around it than just that it abroad level that is it's and that sort of became the basis for things like. For US generated content for facebook for twitter that there was a leaf that there was this broad exception where they couldn't be held liable for the content posted on their platform and that unlocked lot of activity around UGC I think without that term without that clause surviving and remaining surviving clause all this because all of the decency parts of the CD were all struck down on constitutional I. Many reasons. Then you would have a very different Internet's I would argue about but I know many people would argue differently. Is kind of a coupled with this idea of regulatory change being important is just the basic idea of rule sets to begin with a loved expand a bit more on that. You know use clever examples from like half a block together how soccer came together and how this relates to what we think of as free markets. So talk about kind of. The relationship between rules, laws and free markets as a lawyer like I've just been taught. There's no such thing as a free market you want a free market go to Russia. Whoever's the biggest gone winds? That's a free market. If you want the rule of law if you want the bundle of rights for property rights that is infringing on the true free. Market, but it was also creating a shared platform of understanding from which people can transact. These were the same insights that underlie the original stock exchanges. Somebody was there to put down and build trust on their common laws how you create contracts that could be exchanged. The example that you mentioned about football thing that I always like to say twenty two guys. Beating the shit out of each other in a field doesn't we suddenly become the super bowl ever choirs rules that requires regulations, requires contracts. All these things have to be commonly agreed to the early days of Football College football in the late eighteen hundreds people dying quake constantly there's no rule book. It just became a free for all enough players enough kids. That somebody said okay. Let's put some rules in place here. What is I down actually mean what is a catch actually mean how many downs are there? Once you got the shared set of rules than the play all became much more constrained around those rules wasn't just a free for all where whoever was live at the end was the winner you actually had to abide by certain things and those rules have to be tweets over time. People learn to exploit them. This is not some system where there's a perfect set of rules there never is that suddenly things are all going to work in a healthy way you can create competition through rules. My favorite modern example of this is f. one racing where every couple of years they changed the rules around the build of the cars because if you leave the rules in place for too long, the cars get too fast they get. Teams that are able to exploit certain things about it. Also able to pull away you get this fundamental inequality but if you change the rules in very them up a bit, then suddenly everybody is looking at this new jumble and they're kind of on a level playing field all over again, you get a lot more competition out of that you get a lot more innovation activity. You're not just trying focusing on spending ninety, five percent of the effort to get the last five percent of the way there you're spending all your time getting that I ninety, five percent all. Over again, and that's where economic activity innovation really lies in the opportunity to create things out of whole cloth. But you still need some shared basis of what is right what is wrong? How are we going to interact with each other? How are we going to exchange things? Wonderful Book it's called reinventing the bizarre Stanford economist from around like two thousand, seventeen, thousand, eight, the talks about just the limits of markets they can be used they can be misused, but you have to make a conscious decision about how you use them if you want to get a economic activity result. Other any other interesting angles on the regulatory changes that have happened recently before we move onto the cannabis space for the majority of our conversation that you've washed with interest in this could be say in the last five years crypto and blockchain are looking for the same thing. They're desperately trying to get the Fed to declare them store value. I don't follow the space nearly as closely anymore every time you hear blockchain here, shitty database. They also clearly recognized that some sort of government sanction is required for this to be what they all believe it can be the obvious one is Uber. Car shares this whole industry arose because we weren't enforcing laws around taxis and how they worked around employment. Demand contractor you look at Uber I don't see technological innovation or left unstuck logical innovation although there is some like the distributed dispatch technological innovation. But fundamentally that whole business that entire when I say that business multibillion dollar behemoth of business that it is the capital horde that it is is built around a use of independent contractors at a scale that has never been done before men that is built on on a legal issue. You see now ab five is out there in California and they're claiming that it's going to kill the business clearly laws matter. They would not have been able to build that business in the way that they did if they were required to employ the full time driver's. Got To build a very different business that was very favorable bolts who their capital because of that independent contractor relationship and interpretation that was at odds with the pre existing definition of what contractor was. Let's move on to your area of interest and operations specifically today in the cannabis space. I don't know that I've ever done a full episode on this topic I don't think. I have. So I'd love you to begin by maybe your origin story why you got interested imagining a lot of perceived opportunity is the potential for regulatory change but talk through your initial interest in them we'll get into everything you've learned since it's a story I. Think Lot of investors would recognize themselves I got interested in the space towards. The end of two, thousand, thirteen, I was teaching entrepreneurship. I was kicking around town doing strategy operations, work variety startups, and I was looking for what to do next and as part of that, I was kind of interesting getting back into investing but I didn't necessarily want to go back into venture. I. Wanted to broader mandates. I have always kind of felt allergic to the silencing of technology as its own sector was companies that put themselves up Technology Migrate You'RE RIGHT CG company that uses technology just like every other TV. Using technology and being technology to different things. So I was looking for something broader than that. 'cause I I love technology. I've been deep in it, but I see it as a tool to affect other things not as an end in itself and part of that process of pitching myself to funds was developing bitches on market places and market spaces than I. thought the funds invested into the spaces and I was really interested in were under banked and cannabis with. In Washington on the verge of legalizing, which they didn't January twenty fourteen and I kept in glass out of the room nobody was taking me seriously like I got a lot of stone jokes but I kept taking it really seriously I'm a big fan of the early days of venture back in like the Don Valentine days everything was unstructured. There are no clear deal terms. There's no standard sheets there was no anything just the lack of structure. Was the opportunity I'm like a big believer that once there's a vault guy something all of the real opportunity is gone. There's been evolved guide for venture for fifteen years. Now, there was no vault guide to cannabis is all brand new and was changing rapidly and that was really attractive and the fact nobody could have built up expertise in this already because it hadn't existed was a real attractive thing to me. So started looking at the space. I in a search vehicle format, we were thinking about it as a fund manager, which was my background in line with that was looking at different companies to invest in we're trying to be safe by investing more on the technology side trying to avoid plant touching operations dealing with all the legal complexities of touching the plants given state level laws was a big concern and a couple things happened is more or less all the same time I. We saw this race to potency going on with edibles wherever is trying to shove much THC as possible into the smallest container. Possible. We also made the decision that like, Hey, if we're going to be in cannabis, let's be in cannabis. Why are we nibbling around the edges? Let's take this full risk Michigan take a risk, just do it, and then the third thing that happened was my grandmother asked me for a pop Ronnie and those three things. All happened within a week of each other and what was really interesting with my grandmother is the she didn't want to get high. She just wanted to feel better and I couldn't offer her anything that would make her feel better had this one brown is hundred milligrams that cut him up into twenty pieces. I individual bag need half a morsel and wait two hours scared the hell out of her shoes never gonna try even offered her joint. And she was like, no, I'm not a marijuana user self identity was a big part of the. So we started looking at this as an opportunity and in terms of functional foods these are compounds that we know have effect. There's no question about it. Well, that's usually the biggest question with any new foods or supplement is, does it do anything in this obvious THC does something? How can you put it into formats that are mass acceptable that? Don't change people's identity and that are consistent enough that they can feel comfortable using it anytime during the day and that we can feel comfortable investing and building our brand against because we know that experience is going to be the same from day to day. That's we oriented ourselves very much as food company focused on cannabinoid rather than it cannabis company playing with food, and it's been like that ever since you said before we started recording that. In the early days and maybe still today this industry is filled with a lot of bullshitters I'd love to hear your take on sort of what the evolution has been like of the quality of the industry participants. Before we get into some of the kind of market sizing stuff which I find fascinating I don't want to denigrate the early participants in the industry. Anyway I don't think they were more full of ship than today's participants as participants are. But they are also full of Shit. It's not even intentional most of it is just. Ignorance or just arrogance gotten a lot of people who are like I'm well aware of how this market works. That's great. I've been here six years I've been studying everyday my wife and I don't even know that I know a thing about it yet good for you I'm proud of you. So in the early days had a lot of people who were renegades they were doing something that was quite strictly illegal when we. Joined the industry in twenty fourteen I like to joke that we were taking handcuff risk at that point we were but not nearly to the extent that people were a couple years before us, you had to really be comfortable operating without any sort of business controls operating fully cash don't worry about accounting just flying by the seat of your pants operating that business and I think when that all went legal a couple of things. Came pouring in and they looked at the marketplace and they treated the way they normally look at marketplace their new to let me see what the leaders are in like to invest money in them. Well. They forgot that it doesn't really work the largest players in an illegal market who have been given. The color of law are still the same people they were before they were given the color of law. They just were people who are willing to take risks that nobody else was willing to take criminal risks and nobody else's only Dick. Those are not generally the traits associated with building a responsible business that has cost controls, good accounting practices, governance, good project management but they were characteristics of the early markets. It was really interesting early days back at the beginning of twenty fourteen went to what was. Then probably like the world's largest marijuana conference, which was held at the Airport Holiday Inn Express Logan Airport in Boston and it was me and a room with thirty is fifteen of them were stoned out of their mind talking about the great shatter and flower that they were growing another five of them were lawyers and doctors understood what this could do and we're really interested, and then the rest of them were real estate guys who owned a bunch of warehouses that really wanted to get grows in them. So they get that really good cannabis IRA and everyone was shooting for in those early days. It's obviously changed dramatically I think up until last year at least or up until this year, he had a lot of people who still thought. This was all just going to be easy I graduated from Grad School rain to the teeth the great recession two, thousand, nine, I had to advanced degrees and no work experience. So I got a very clear taste of what things look like in a down market and I think there are a lot of people in this industry now, who have no conception of what a down market is at the whole promise of marijuana and imagination that is just suddenly going to legal and everything is GonNa Change I. Now these things are complex. The retail system is complex, the distribution system complex, the production systems all have to be brought up individually. There is a lot of people up in the early days who thought they could be I and be the Warren Buffett of we'd never mind none of them even knew what Warren Buffett did they just going to integrate everything I'm going to take peace from everything and it's going to be fantastic. Yeah. But then you never do anything well, and everything is expensive and none of the accounting actually works and what if the market changes? It's just There are a lot of these hopes and dreams. The didn't bare. Any relationship to how the world has ever worked in reality. I would love to walk through the industry a little bit for the initiated myself included I think of as sort of supply chain and value chain. What is sort of the end to end industry look like what are the major stops along the way, and then we'll get into caliber and stillwater. There's two things we got to differentiate. One is the CD industry versus the teach industry. Those are wholly different industries with. Wholly, different infrastructures and wholly different regulatory structures. Let's start talking about the THC industry because that's the one that runs tried to nationalize you though it is federally illegal and when you look at the THC industry, you're really looking at fifty different industries. Each state has its own set of laws and has its own market structures. Someday, there is just going to be an absolute glut of economic research papers on the natural experiments. Of, new markets with different market structures in the context of marijuana, which products they create in which behaviors they incentivize. So I talked to Colorado directly in a couple of other but in Colorado at least there's a three tiered system that's based on the same model. As alcohol a cultivators you've got processors and you've got retail. There's a couple of other that come up. But broadly speaking, you've got tears, you got the. People grow the pot. You got the people, extract the pot and make the products. Then you've got the people who sell it there is no like distribution infrastructure. There is no co-manufacturing construction. This was a big learning for us in the early days when we first came to Colorado and said, we WANNA, launch microdots t product we talked to people who are in CPG and they were like, Oh, you've gotta go find yourself. Well. Come in aren't legal allowed to manufacture marijuana in Colorado. To Go and get licensed to be marijuana manufacturer, and you can't manufacture anything else to get that license you have to attach to real estate well, that real estate's based on whatever the city ordinances are might have to be thousand feet back from. Imaginable, whether it's schoolyard to halfway house to open space that might one day be zoned residential. Then you have to find a building that doesn't have a bank note on it because at the bank has a mortgage on it, they're gonNA veto the lease. So you've gotta find a wholly-owned building that meets all the setbacks and is in a city or county too. Narrowly state that legalizes it's the state that allows for legal reasons, cities and counties that legalize. So you've gotta find it in a city or county that has legalized has rules that you can actually live with. So that's all part of getting the license huge. Then you've got to start producing your stuff. From the beginning we do not want to cultivate, we looked at cultivation as a commodity you do really well in the early days when the prices are high demand is high supplies low and everyone will just buy out anything on the shelves experts date on that markets mature, and you could make a lot of money as a retailer but you also. have to understand the most customers in this market are either tourists are highly price elastic. So it's really hard market to make that in. We were more interesting brandon goods because we felt like it was going to be much more generalize -able beyond one states we felt like that was really the linchpin between what we viewed raw-material just they can avenue eight. And a finished good product that actually had a consistent experience around it and really been the locus of our investment already ever since as just understanding how to qualify a good cabinet. What does that actually mean the raw material? These are things we've got a ton of food scientists now offer major companies and like to say they're very good at qualifying agricultural. Materials, they have learned how to do that in the large food and cannabis has its quirks. Fundamentally you're qualifying an agricultural commodity trying to convert it into something that is useful for processing, and then you're trying to actually manufacture it, and there's a really interesting side conversation to be had about things that held the cannabis industry back. One of them is the. US over the course of the last number of decades has evolved to a CO manufacturing infrastructure for consumer goods. So the same it's sort of a store rates. Aws has with technology where you used to have to build everything soup to nuts, manufacturer all yourself, and then the came these people who built the manufacturing infrastructure and you could rent time on. Their lines. So you didn't have to investments well, all the equipment that they had to rent time on was national scale even if the state allowed you to work with them, turning on their lines would produce ten times more inventory than you could ever sell. So there was this mismatch as an aside beyond that to the equipment manufacturers themselves stopped manufacturing small-scale. Equipment it was really hard to just find stuff that could be used in a single state environment. So there was just a lot of complexities to be worked out in this market for it's actually function because everyone was trying to assume like, okay. What I see in CG that's GonNa work in THC, it's like well now there's fifteen reasons why that structure. Doesn't work here. All of the tricks that you've got you've now got to figure out new tricks, none of those work any other interesting backstory or timeline points just in terms of y took. So long for this to happen, the you think are important antecedents took on where we sit today whether that's laws regulatory wars, kind of the social stigma of it. There's scientific excuse for marijuana have been sitting around schedule one for as long as it was this was known when the schedules I came out. There was Schaefer Commission report that immediately recommended rescheduling the Nixon Administration put in a drawer in the early laws all the way back to the stamp, Act Tax Act it was racism against Mexican immigrants the word marijuana prior to the marijuana tax act cannabis tincture marijuana tincture was. One of the top three most used drugs in the country you can go back to the US Pharmacopoeia and find lots of tinctures there. You can find from Bayer Cannabis tincture in them, and then it was decided that this was associated with unwanted Mexican immigrants, and therefore we need to illegalize as much as possible. Then you've got coming up on the controlled Substances Act in the late seventies, there was an interview with. AIDS he stood up admitted we couldn't criminalize being black. We couldn't criminalize being anti ward, but we could criminalize the one thing that they had in common, which is a love of marijuana and that part on crime and tough on crime mentality the racist elements, all of that just hung around for a long time, and then you just had this cohort issue where you've got. A whole generation of political leaders who still believe this is a political third rail despite the fact that it's got sixty seven percent approval among the population large and even fifty one percent approval among Republicans it's just one of the strongest mental models cohort replacement. Some things don't shift until the people who are holding them back are gone and I think this fits that bill very. It's fascinating and so screwed up in. So many ways when you really dive into the history here, it's this sequence of bizarre events that lead to a very large macro outcome. So appreciate those little touch points there. I. Think definitely something for people to go look because it's hard to believe some of this stuff until you read the laws, it's hard to believe it. It's also. It's hard to conceptualize. The concept of a drug is a mental frame and the concept of new illegal drug is a mental frame can't tell you how many conversations I had more in the early days of this company where people be like well, I don't do drugs I'm like you got a nice wine cellar over there man well, no, that's not really a drug I'm like some nice prescription opioids on your cabinet. Well, that's not really my doctor prescribed. I'm like your coffee really enjoying that caffeine right now. These are all trucks they all augment physiology. The question is really what is the safety profile? What is the effect marijuana THC? These are fundamentally no more or less dangerous than caffeine it's interesting to compare how caffeine has been regulated over time versus how marijuana has been regulated over time visit is just a very natural counterfactual. That is fascinating about what is accepted, what is rejected, and what that does to two things that have a very similar safety profile. If anything marijuana safety profile THC safety profile is better than Caffeine's. Raises an interesting question of degree. So I think the impact of smoking a joint or something at least in my experience a little bit more impactful than a cup of coffee. But I think one of the things you've learned is that ethic you mentioned understanding the actual molecule better and Sorta dosing and what that range might do to people say a bit about how that figures into the business plan the products answer to how you build the brand. I basically throw out almost all research done before twenty sixteen throughout all research done around SM- inhalable marijuana because we just don't know all joints are not the same. Every joint is different. Every person is different. The amount that you're actually consuming is unknown edibles are actually started our first opportunity to control that inputs and reduce the variable there to something that what came out on the other end was actually observable and useful. We do a lot of work at our company with some academic partners on studying the pharmacokinetics of our products. We WanNa know how much THC is actually absorbed into. The bloodstream in different formats, how much CBD's actually gets into your body? How much do you take a pill but how much shows up in your blood and it turns out that everybody is different it's wild person person variance in terms of who absorbs what and how much even in waterside overseas water insoluble formats is crazy. Some people just can't get high some people don't absorb CBD other people can only get high through edibles which absorbed through different pathways than inhalable inhales, and this is all great science that should have been done thirty years ago, but has been delayed until now. So look. At a lot of the old studies, I'm just like I don't know what to draw of that is because you've there's a question of magnitude I think it's almost criminal to ever talk about direction of effect without talking about magnitude of effect, and this is in pretty much any circumstance. There are absolutely risks with THC never going to play that down but the magnitude of those risks have been wildly overblown and we are learning more and more about that. especially different dose levels thc kind of three different drugs want a sub five milligram dose for most people it's like a light and. The Olympic perfectly fine people can function operate no problem whatsoever five to ten or five to fifteen. You're starting to get real stones. You're getting high for most people although changes again, like different people have different tunnels at least with thc once you start getting above fifty, it's a psychedelic experience. Almost it's not one that most people care repeats but the for you can really start discussing what's the effect of marijuana? The question has as many multitudes. What's the effect of computers? There's a lot of nuances be baked into their before you can start answering that question with any sort of specificity that's. What's the most interesting difference between the CBD Industry in the industry? What are the relative sizes I could even wager close guests as to how revenue basis or something what the difference between the two US I've seen good numbers the legal thc industry I think sitting like ten to twenty billion range today. The illegal industry is sitting in the sixty to seventy billion dollar range for THC. In MRS IN AMERICA CD I've seen estimates that this year you're talking like two to four billion I. Think are probably a little bit high it's really hard to tell CBD has just unregulated THC is actually more regulated in CBD right now thc like, yeah, the FDA won't. Touch it. But at least the states are paying attention to it before products on the shelves in well-regulated states like Colorado it has to go through cannabinoid testing, which is imperfect science that is developing but at least it's something. So you at least know what you are taking to a greater degree than you used to. CBD. Now there's none of that companies are self-regulating but self-regulation isn't a thing self-regulation is just asking for trouble. There's no incentive to actually abide by the rules when I lobby on this issue I, keep saying the returns I'm lying or far greater right now than the returns on doing the right thing and that's a regulatory fault that is. Something that regulators can change the answers by putting in place regulation. How much do you think is left to be unlocked in on what timeline? So it sounds. So it's still early days when I asked, what are the top three variables that matter for the future here you said regulation regulation regulation. So what does that mean and look like almost all of it is left to be locked when you think about like I said, the THC market right now it's fifty individual states that operate all lines soups and not supply chains more or less the national industrial food supplement and beverage supply. Shane is in the US is probably the most robust in the world. The. Marijuana supply chain looks nothing like that and could benefit holy from that. This is to scale structure that has been put in place yet there's a breadth of use that has been put in place yet. There's no reason why a lot of products can have one to two milligrams of THC as not a intoxicating dotes there's no reason to treat. That's the way that we do the ten milligrams stuff. Yeah. That should be treated like alcohol. That's great. It should be I, think the CBI we got we know so little we know that it has bioactive fact we know that I mean it was proved as prescription drug it clearly as bioactive effects got good. Properties, it's God's good anti anxiety properties, good anti inflammation properties, but we don't know at what levels it has those in four which people in for what conditions this sort of thing that only really comes through research and experience and just putting the markets and structuring the market so that you can continue to collect good data especially as regulator, and so you can make good decisions and how to build for this forty. CD. The tinctures that are the most popular part of the CB world-renowned. CAD Onepointoh. Was All these pictures that would go everywhere well. The best research we have suggest those things are six percent bioavailable, ninety, four percent of what you consume is getting excreted out without entering your bloodstream. It's one of the people don't have a good experience that product it's also basically intermediate good nobody runs out and says, you know my favorite thing in the world is to do is to drop raw crude oil on my tongue with an eyedropper that's not a consumer product. There's also sets of claims that have to be developed around but that takes time in research once you get past the teach the canals in general this is a category of ingredients think people make. Claims when they say one hundred and thirteen identified cannabinoid all have bioactive the fact yet maybe to some degree, but the real question is going to be which ones of those can be produced in an economically efficient way and brought to market with a safety profile that matches what we as a society are comfortable with and sold for profit. The answer to all of that is probably going to be not I think I'd be happy with three to five additional. Follow on can happen in the next decade that would come up. There is a set of materials that are the most fascinating bioactive that anybody on my team has come across I've got people who spent the last twenty five years at eminent Mars, working their functional ingredients, divisions, and wave and horizon organic. These are food scientists who have been paying attention to neutral to bioactive ingredient functional ingredients. This is the most exciting space of new science, any of them ever seen. Can you talk a bit about the kind of business and investing angles here? So one interesting question is does some of the opportunity exists because it's so fragmented and the big brands big CPG brands can't deploy their scale and their marketing advantage to just go win the space right now, talk about that transition period and sort of where you think the pockets of potential value are for entrepreneurs and investors. So there's two things that I think are holding back. The big brands one is you're right federally illegality is holding the back anybody who has existing. Business Line to protect can't afford to take the risk of operating this. We've said from the beginning that one of our big benefits is that coke isn't sold on the same shelves as we are or not solving some shells as they are sucks that we can't sell on their shelves, but it's great that they can't sell ours dispensaries are unique environment aubrey much more like jewelry stores than CVs bud tenders drive seventy percent of the sales of new product sales because people come in and they know they want experience, they don't know which product to get. So, this is all opportunity that is available because the big players aren't coming able to spend time on so that you can succeed at a small scale and really make it work. The other thing is the lack of federal legality just cuts all the advantages out from those big players. Those guys have all built up infrastructures that are designed to serve massive markets. If you told, Coke, I need you to produce enough soda to serve one person a day. They're like, great. We do that five times a day. No problem. If I might great I need you to produce enough coke to serve hundred thousand people there like Shit. I don't know that I've equipment I can turn on and turn off without losing all my money. That's too large scale they also don't Know like that thing that I want produce what's the right formula for it? How do you get to the right formula? You have to start small and work your way up companies not that I think that has been a real advantage to the marketplace just all of the things that make it hard are the things that keep coke and Pepsi out in things that keep innovation and small operators and opportunity in at some point they're going to come in and that'll be a different. World but in the meantime is long as you have the right understanding of what the opportunity said is, which has to take into account with the demand side looks like where you can ship to truly what the market is and you build your production platform to match that. Then you've gotta opportunity if you over build relative the opportunity, you could get into trouble real real quick. What do you think is the competitive frontier for your businesses consumer brands versus others? Is it equality is? The brand itself is it relationships with bud tenders never heard that term that's hilarious. What is the competitive frontier? Where will this battle be won or lost again it depends on timing. It's very easy for a lot of investors who've gotten used just investing DDC brands on Instagram is friend of my calls at like Qvc for millennials where they just have platforms they spin up a brand, slap it onto a commodity product and make some money off facebook ads. No other profitable vomited lives. We're not there yet a brand without consistency is just a logo. You actually have to produce a consistent product and that is actually really hard specialize in term can avenue it's water soluble. The reason why we do that so that they'd be placed into water based food systems and as well. So low fat food systems and we've also discovered that there is a much better absorption profile. So people actually get what they have bought into their. Bloodstream to do that, consistently, it's taken years of our investment and I think when people go to fast with too much money they go in the wrong direction I. Think you saw this with constellation had this whole thing when canvas two point Oh came down where they're like, oh, like can liners the aluminum can liners were t h c? So we have to delay launch well yeah. That's because you treated a two million dollar problem like two. Billion dollar problem that was a solved problem. Already, the CAN liners and it's solvable if you have a small line and good food scientists who can operate flexibly. But again, there's new science here. What is the shelf stability working in acid versus base will abass breakdown CD? The answer is, yes. Do you need a high s environment for it to actually live in? How long does that see stick around does degrade below the label claim these Are All like the structured parts of the food supplement supply chain. It has to be verified before they can be scaled and I think a lot of people were just especially if you're trying to do brands, you want to go straight to scale because you want the cheapest way to get their word and infrastructure phase in this industry you've got to be in it for that. You've got understand what you're getting into some day will brands went. In when you've commodity infrastructure that everybody has access to that's the only way to differentiate. But today quality and capabilities are how I think you differentiate yourselves. You actually have to build the platforms on which you operate. You don't get to go out to just rent somebody else's. What are your thoughts on sort of where this all goes from here? So if the first part of this was the handcuff risk, the second part is sort of the state by state period of time, and maybe the third piece is some sort of federal unifying. What is it time for something like that and when will we look back on this and just think was a crazy period of transition. So on Thc I think you could see a lot of movements next year depending on the outcome the election obviously marijuana reform in social justice reform and criminal justice reform all tied very closely and for many obvious and deserve reasons CBD, you had Senate Majority Leader McConnell legalizing the production Of Hemp at the end of the twentieth Farmville by it's FDA has been slow to actually accept responsibility for the derivatives of Hemp that legalize namely CB FDA's claim to three to five year time line I. Think it's wild for a food public health regulator to just ignore a market where twenty to forty million people a day are consuming a product totally unregulated because they don't have enough information now you regulate the market. Can you improve regulations over time? You don't look for perfect in the meantime consumers to twist in the wind. So that goes back to my point of like you need regulators who want to regulate and I don't think we have that right now. I, think hopefully, we will have that by this time next year and if you have regulators who are dedicated to. The concept of public health who are dedicated to imposing the will of Congress and enshrining that's in administrative policy. You could have CB regulation. Next year, you could clear up the banking issues around THC next year you can get thc probably starting decriminalization, but heading towards legalization with next twenty, four months. These are all things that could have been set any time in. The last four years. But one thing that I do believe is if thc and CD of manage to make this much progress throughout the administration's attorney general sessions and bill bar the two most anti marijuana people I could imagine God. I can only imagine what happens when there's somebody who's making the life's work to destroy it so we could be looking back on. This three years from now I think with wonder I kind of hope that the next president who every might be would embrace marijuana in a similar way to how President Obama embraced gay marriage maybe was circumspect that the election but then he got it across the finish line once he was in office and I think that's totally implausible analogy that can happen here. Can. You walk us through the business itself in sort of what it looks like in terms of almost like an income statement walk through what kind gross margins are we talking in a business like this? How to sales and marketing figure in what are other notable key aspects of business that determine its long-term kind of margin potential again, it's different each stage, the supply chain. So I can really only speak to my point as a products manufacturer. The margins are quite good. You're talking thirty to forty percent even a-, and the key thing is we don't have a huge salesforce only got three, hundred thirty stores to sell to. We got a salesforce three. This is on our THC business side. So that's still water brands are THC business, it operates. Serve three hundred sixty dispensaries covering a population of around eight million total population state population around million we self distribute to them through a mix of couriers and our sales people directly dropping off. There's not a lot of advertising to be done. So I don't think people fully appreciate the Google and facebook won't take money from CD or THC companies. If you've seen those ads than they were placed their against public policy and usually through some sort of work around that was probably enabled by the sales team at those. Companies, but it's frowned upon by the legal team. So it's not like you can spend your burn a hole north performance marketing. Even if you wanted to, I mean the way you do it is you have to, if you want put an ad on Instagram I, you have to go out and buy like an affiliate's placements and get an article written on some third party sites, and then you have to have them by an ad against that article that links to your website. The transaction costs neoclassical economic sensor just massive. In the space and yet still thirty five percents been. So wanting a lot, we really pay a lot of attention to operational control. We pay a lot of attention to emergency pay a lot of attention to good process because we believe that if we can learn to function in an environment as fucked up as this, the headwinds are only receding. So it's just removing from advanced level as we get towards clear federally galaxy, you're retreating towards and more of an easy mode men no play just more and more opportunities. Open up for us. But for now, you're just facing problems everywhere you look everything takes five times longer if not ten times longer, it takes three vendors to find one who can do the job. Each one of those vendors takes two months to figure out what they know anything. It is a blanket rule in myspace space for my staff. Don't believe people when they tell you things it was a blanket rule for me as an investor, but it's especially a blanket rule for me here and it's not because people are. Dying I think people are just they're optimism they can't distinguish between optimism sales and lying. So as seen like rafter after people come through with just huge plans that never made any sense never materialized. Thank you back to that founding story I'll of the POT Brownie story as to the origin insider something what after that would you classify sort of the first big break for the business? So if you've had any step change improvement since the prospects of the business, what was the first big break that stands out in your memory? After we decided to become a food company, we wanted to produce a product of my grandmother ninety year old seniors and the product came up with is called stillwater. T was tune half milligrams of THC, and it was explicitly designed not to get you stone. It was supposed to replicate the feeling you'd. Get from taking three deep breaths and have of that last for a couple of hours and we went out to sell US dispensaries and were met with a collective T.F. We had one by tender is like did I take three hundred milligrams for breakfast? Why are you pitching me a two and a half milligram product to which the responses I man you've gotta problem but second this product isn't for you. This product is for other people some would get it. We would get people would give it to their mom but tenders and her mom or the grandmother would love it, and then they would become real advocates for it it. Never, really took off and it turned out because you have to account for what your retail channel is and the people walking into dispensaries just weren't that interested in the low dose products we couldn't market to try and bring in more people and the dispensers themselves and really have much interest in going outside that core customer base and they were making money and they didn't do any work. Everybody loves making money off studio work. So we couldn't get the target customer that we built this product around to even get in front of us to even try to make the sale and that was a big learning for us. It's sort. Of like you can't fight the Fed you can come in with the mark in, want to say have all these big ideas for how things should work? Why aren't these products merchandised? Why are they all behind glass? Why am I listening to a bud tender as if he's a pharmacist, why can't we advertise talk about the things that we're doing but then there's like the market as it is and you've got to figure out a way to sell into that. Fortunately, we had on the back end. Nice little innovation story where to produce the water soluble component of the teas. We were basically creating these crepes of slurry like an. New Type feeling texture, and then breaking them up by hand, and we were dumping the granules into t sticks. T stick was our form factor. It looks like a stick pack with of perforations functions a teabag, but is part of that we had to have granules of a certain size. So all the grain was smaller, the fines we're basically throwing out. Well, our yield was turning out to be like fifty percent of our THC which are core input there and That was fine with a a half milligram product. But when we realized we had introduced a product that would get bud tenders excited. So we made a ten milligram t we realized that man you can't get by with fifty percent yield on the ten milligram product just getting destroyed on margin. So we looked at a couple different things we could do whether we could try and find a different way to gripe ultimately decided was, hey, this powder parts the water soluble. Piece was really the most interesting piece when we package that up into packets and sell it as done product that became ripple ripple is like a little stick pack odorless liable flavourless clean label, soluble thc. CD mixes drop straight into a beverage and dissolves instantly, and that was the product that came out of those two things to go. The need for product would get excited the need for a process or a use of the waste so that it didn't destroy margins. And suddenly that what was before waste became our growth engine that was the product that took off everyone got really excited about eighty that you can make anything an edible and then they got really sight even further because we started discovering that people are giving these anecdotal reports that they were getting high faster with ripple than they would when they were taking other edibles and we believe them but we couldn't prove it until we went out and actually did the studies. What a fascinating turn of events really cool story to look back on the book and our conversation with another couple of questions just bigger picture kind of harkening. Back to your background as an investor first and then wrap up. So my first question is you mentioned studying under Tim Wu what specifically you learned from Tim. What made him special what you take away from your time learning from him I don't want to oversell my relationship with him. I don't think he would know me from Adam at this point, but he did have the best class I took and he was my major writing professor. But the big thing from him was just that market structures matter. That was what he was really talking about back. Then I think it's still what he's talking about today. These things don't just exist vacuum markets don't come out of a vacuum they're not naturally occurring. There's nothing natural about them. They are created by man therefore, they need to be created with intention if you hope to get out of them what you expect. You also mentioned that you're intrigued by Jim China's idea that this is sort of a golden era for fraud I'd love to hear why that idea is interesting to you and kind of what it means to you. That just feels like sort of violently true. At this point, there is absolutely no penalty for lying bullshitting. At this point, we are rewarding the bullshitters from top to bottom and. That's fine I guess I think there is a belief that you need founders who almost bullshit themselves to create companies out of nothing. But I think that that's a form of idolatry that I think is just straight up wrong. There's absolutely no reason founders of not different from other people may be more tolerant of uncertainty. Some of them are good businessmen. Some of them are bad business people. They are also humans. They are leaders of humans and I think actually putting together an organization where everybody is treated as a human where everybody is not asked to participate in a cult where they're not asked to put the company over themselves where they just like this a job I need you to be good. At it and then I need you to go home and enjoy your family. That's a much healthier way of doing business and I don't think you would see any reduction in good in innovation that actually has societal benefits off of that if anything you'd see the exact opposite I think most innovation these days is geared towards things that can really raise the value of equity but not necessarily be standard of living of all the employees within the company. Yeah I hate this notion that founders are aliens who are just really good at some sort of thing most of the time they're actually atrocious human beings who are just being carried by competent people within their organization while they're being treated like children internally. If you had to re enter that world and be backing founders actively, how do you avoid that problem? What would your advice be to investors who are primarily making bets on people to avoid that type of person? So you have to structure its Jerry and I talk about this all the time and I am fully on board with him that we're both on board with Connor and Gary King that there's no such thing as intuitive investing when it comes to people, those are complex open systems. If you tell yourself, I just like the cut of his JIB, they turn out to be great. That's look good for you. That was not something that is repeatable. But what you can do is you can create structures decision making structures that try and look for land mines we those out you can try and raise the floor of whoever you hire. Don't think it's possible. To hire perfect person what perfect means different in the context of an organization, a team time. But I do think you can at least construct a hiring process to probe for things like integrity to probe for things like a willingness to play games at the truth to probe for just the difference between somebody who can describe things for somebody who can actually do things I think you focus on those and just mart has this great smart hiring thing yeah. The book is fine. His PhD thesis as much more interesting about how you actually setup decision structures for unstructured decisions. My best resource for this something, I think a lot about two is the CIA. As internal, library on making structure decision making in unstructured situations. As good as it gets the you think about what an investor is doing. They are trying to predict inherently unpredictable complex system, which is itself impossible to predict a point out gum but you can at least start predicting ranges of outcomes if you structure thinking well, and you can avoid falling in love with a specific outcome, given that the same facts might also align with a multitude of other. Outcomes. These are just things that I think are really important. I also think it's super important. Always play the counterfactual 's anytime anybody I'm mateen is like when you guys did this, that was so smart as like, yeah, that was smart but let me tell you about the three other things we wanted to do before we landed on that one that was stupid that could have worked and we could have been going in a totally different direction and tell the. Story about you just heard the story about what happened with ripple that story could have gone in a bunch of different directions. We get a double down on low dose DECI- we spend more money on performance marketing maybe that would have worked I can't say that it would but I think it's really dangerous to get into the mindset. It was always going to be this way and it was always going to be this way because I'm so good bullshit I. Don't care how good you are. The world is complex. Luck is massive massive factor. The best thing that you can do is put yourself in a position to have better larger options than you had before as long as you keep on doing that eventually, you're gonNA, find the option that you can really lean into at say that a lot with this company, this company is large lever that I ever hope to hold and it got that way because we just. Start with very small lever and kept putting ourselves in a position to God and find things to add onto that lever. We couldn't pick exactly which one was going to be the thing but at least we had the opportunity to go after them in the Cannabis Bay specifically what do you not understand well, today that you wish you did cultivation is fascinating to me I. Know I don't understand it. I. Know Enough of it to know that it's complicated I. Think that everywhere you look in the cannabis supply chain it's easy for to look simple especially when you start scaling it up, things get very variant very quickly just because you understand something the way it operates at one scale doesn't imply that you understand how will operated another scale. That's one that is always scary news just trying to understand what's the next model that's going to work for thinking about this industry. I knew a guy wants who got his PhD. In philosophy of friction and he described it to me as the way that friction works at a molecular level is different than the way it works at an inch levels different. The way it works at a mile level. The philosophy is Wendy. You Change Your model for what works something that has describes the molecular level, and now you've got somebody that describes step up if you try and take the molecular model and apply it to the inch model you're not. GonNa get anything predictive and the models I have for marijuana. Are they just Colorado? Specific? We're GONNA find out soon we're going into Michigan next year is this as unique of the market as I believe it to be or are there lessons this market that are transferable to other states each state truly unique from top to bottom and everything has to be relearn. We don't know yet and that's both scary and wildly exciting. That's what keeps a new and fun. Well Justin I've learned a ton today I like I really didn't know anything about the space coming in and now do so I really appreciate your time. My closing question for everybody is to ask for the kindest thing that anyone's ever done for them. I will tell you at least in my professional career. kindest thing that anyone has ever done in my professional career was Roger paying me out of his own pockets to be an intern it I A and they were friends and family company which got me out of a job in San Francisco that I hated, which got me back to new. York with my wife or at that point my girlfriend now wife which led to me having a kid a dog in a company and all just because he was willing to expend not much money to get somebody who he thought was smart and could help the fund. Fantastic could easily bands but he did it and man and my grateful it was kind. Fantastic. Well, Justin thanks again for your time today I've learned a ton and I hope to send such. Thank you appreciate it. This episode was brought to you by Microsoft, for startups Microsoft for startups global program dedicated to helping enterprise ready BB startups successfully scaled their companies. In our five part miniseries. We were talking to Evan Riser CEO, of Admiral Security about his experience with Microsoft startups. In this week's episode with Evan. Talk. About. Technology. Shifts and picking a cloud provider. What has changed about companies sort of clouded option I would count us and our business in the same category of like slowly, and then suddenly you know we had to adopt this sort of thing. So maybe just describe what exactly because it sounds like a technology platform shift that often makes new companies possible. What exactly has changed and wise a company like yours position. Well, for that yet I think two things one is just how enterprises work. Then the second is, what are the new platforms that allow small teams do a lot with very little. So they in former category like the the general shift is. Enterprises it stack moving into the cloud and the prevalence of migratory five is just an example of that. So that enables all this it and security deeds be available in the crowd and therefore accessible Api's, and so we wanted to build our product ten years ago would need a fundamentally different architecture that wouldn't allow us to get as much data at the same level of detail in deploys quickly and I think with the with the rise of infrastructure and cloud computing, and even more specifically some of the higher level services like azure cognitive services. Those are tools that allow relatively small engineering science team to go build. These world glass enterprise ready applications you very quickly. So you just started in two, thousand, eighteen. So you're you're young company even though you're moving quickly I'm curious what the experience was like at the beginning as you thought about what tools to deploy this is one of the more interesting things for me. Now, because the toolkit available to founders say eight years ago is very different from what's available today you can do a lot less building of commodities stuff or stop it's not your core competency. So how did you think about that? How did you address the problem of what stack of Third Party partners are we? Going to use to build this company on top of we arguments, mistakes, Some areas were very thoughtful wants for us. Thoughtful when we started right we knew just like the speed to market a was going to be very important for us. So we started off by just using the or familiar with right. We didn't do Lotteries Urs WanNA areas, one example inside cotton infrastructure when it to things like cloud infrastructure, it's not really just a technologist it's really a business decision and the reasons why we decide to invest on Azure I think this to on the technology side we had to have the most secure. Of Privacy Centric Clapham to bill on top. Of. The the second thing is clearly for a business and we the technology platform that will need lots to spend more time focusing on customer problems not on rebuilding commodity technology. So being able to use higher level services like AI and machine learning computer vision getting that out of the box just allows it up to do a lot more faster. Of course, I, realize the irony of me being a enterprise technology CEO saying it wasn't a technologist vision but I really think the reason we ultimately decide. To invest in the azure platform was really around some of the the business benefits glide came down to just what is most valuable to the company for companies like us we currently work with maybe three or four percents abortion five hundred. So the biggest challenge for us as a Harris, the other ninety, five percents, we wanted to reduce the cost required rush to go and market ends acquire customers into their scrape programs like the Azure co-ceo program, which enables Microsoft sellers to go sellers from Russia. and. Help with us to help solve customer problems. I think the other thing that was really important on the business side was we wanted to increase our success with customers by lining their strategy. So a lot of CIO today are interested in consolidating architecture into the Microsoft ecosystem they want fewer and fewer point solutions independent and they want one interconnected ecosystem that that works well. So the ability to enable our customers too busy investment microsystem to buyer solution gets as your consumption credits as part of. That to reward them for their Microsoft ecosystem investment. That was another key piece. Big thing for us is that we realized that conner infrastructure was much more businesses and in the past I would have offloaded that to maybe the engineering team and had them kind of side. But for us, we brought to the board and he said Hey we think that all in this actually more important for the business, we get a lot of benefits for both the company and for our customers by investing Microsoft overall. To find more episodes or sign up for our weekly summary visit investor field guide dot com. Thanks for listening to founders field, Guy.

marijuana cannabis Colorado facebook Microsoft I ventures Patrick o'shaughnessy US Vantaa Advanta founder Venta Shaughnessy Jeff Telekom CB
A tale of two direct listings

Equity

12:05 min | 10 months ago

A tale of two direct listings

"Does your start up to get a stock to report to close big deals or do you already have a sought to report and WanNa make it easier to maintain year after year Vantaa has built suffered the makes it easier to both get and renew your stock to with vantage you avoid anxious auditor interviews and you don't have to capture hundreds of screen shots proving that you are sought to client to your auditors companies like Laddis user testing and hundreds of others have successfully gotten their sought to reports. With Banta appleby listeners can redeem thousand dollars off advances description by visiting Fanta Dot com slash equity. That's Vanda DOT COM slash equity. Hello, and welcome to equity shot are quick hit on breaking news I'm Natasha Mascarenas and today joining me to talk about a tale of not one. But two direct listings on the same Damn Day is Danny Creighton. How are you Danny doing? All right this is exciting. You know we went from a world of no direct listings to an occasional direct listening to multiple direct listings in the same day. So it's an exciting exciting morning. We can finally stop breaking up spotify in slack whenever we say the L word and reinvention Asana, and pollen tear, which are the two news heads we got today it's zoo of curiosities. But lots of great stuff to talk about where where do you WanNa start you WANNA. Start with Asana or palate here. What's more interesting to you I think I have to start with pollen tear and my big question is you've been tracking it through every. You know crazy filing, your high level thought was this a successful debut on the Stock Market for? Today I think it's a definitely a success. You know the stock from January two, thousand, nineteen onwards trading at around five to five, fifty, a share, and then in the last two or three months that price jumped to about nine dollars and sixteen cents as of September first, and so you know when when the reference price came out yesterday from the New York Stock. Exchange which was quoted at seven dollars and twenty five cents. A lot of people were like, wow, that's like a significant drop from nine sixteen like what happened particularly also last week we had the Wall Street Journal reporting they were looking for a ten dollar referenced price. You know none of those numbers were really good but look it's trading. Now it's live as we're. Doing the show, it's ten dollars and sixty one cents a share I'm. So it's better than all the numbers we heard before and it's up fifty percent on day one. So so part of me feels like this reference value was actually chosen precisely to give it a pop on day one you know if they were targeting ten bucks on Day One, this is sort of what they got and so a little bit of a lower reference price might have given them a little bit more of A. Psychological boost on on day one. So I, I think overall to success. Do you. Can you talk me a little bit about how we're trying to value the company right now I feel like I'm seeing a bunch of different numbers out there. Do we have an understanding of its fully diluted market value? We do there's still a little bit abate mostly because Peletier gives multiple numbers for the number of care. So it gives us one point six, billion shares outstanding two point one fully diluted two point one billion fully diluted than two point five billion fully fully fully diluted and so. I would say that its current share price, we would call it around twenty, four, billion in evaluation, which is an uptick from its its last rounds. Again at you know for a seventeen year old company to have the sort of strong debut on Wall Street I think it's pretty good. All things considered. Okay. Cool. I'll put a pin in Pailin tear, but I do want to talk about their lock-up period later, run me through Asana numbers I. saw it opened at a five point two billion value. Yes it's on a similar story. So yesterday, The New York Stock Exchange released a reference value of twenty one bucks per share. It zoomed straight out onto the public market. So it debuted, it's currently sitting at twenty eight dollars a share up thirty three percent on day one so far it's up to about I. Think it peaked at five point, two billion, and as of now is more like three point five, three point seven, five, billion market CAP. But again, that's actually significantly higher than his last valuation, which was an inlet late twenty, eighteen around one and A. Half billion dollars so either oke across the board I think both of these issues you know there's always a lot of risk drake listings. As you pointed out Natasha there haven't been that many is this sort of a novel mechanism. They're still a little bit unclear and exactly how they work, and so it's great to see again similar to slack spotify you know these are two enterprise. Companies to again totally different from the more consumer is random companies particularly spotify, which has tens of millions of consumers who might be retail investors buying into the stock. Most people haven't used the Sauna and certainly must people haven't used Pailin tear and so to see the kind of strength on the markets and the first day is is enticing for other companies considering the direct listing model. Right There I feel like pollen tears total customer base was what one? Hundred Fifty, company, hundred, twenty-five customers. That's a lot of customers Doing Gospel distanced. Something it's probably my favorite statistic about the company and I think I saw Dan Prime tweeting the other day that you know it's no longer going to be a secret of company. So we can stop calling it as such. This is the end of that right that confrontation about pollen tear for. So long we've been having well I, I will say. This about an hour ago. So may not be true today. A ASANA has an investor relations page like a standard like every company who publicly trades Peletier does not like it actually does not have as as of an hour ago that I looked up I could not find an investor relations page for here, which which tells you everything you need to know about the company I, feel like that is like in a beautiful one sentence or describes his relationship with investors, but but I think you're absolutely right you. Know despite the fact that only one, hundred, twenty, five customers despite the fact that took seventeen years three hundred grew it's growing from seven hundred, forty, three, million in revenue last year in fiscal year twenty, nineteen, it gave a revenue projection for twenty twenty about one point, five, billion to it's a growth company. It's SAS more and more SAS today than it was in the past where it was more services driven. So again, it's a positive story despite all the kerfuffle around its governance the last couple weeks do you Do you feel like the direct listing method might now take on more popularity. I. Mean. Maybe in some way, but can we even is? Is it enough of a success? You'd think that other companies might follow suit now that it's not just spotify that that did this. I think the more the merrier right I think Palentinian particular raised capital round back in. July right which was sort of what I was told from some insiders essentially the IPO that was the IPO and then direct listings just the actual market exchange. So I think we're GONNA see more companies taking this approach of bifurcating the capital, raise the float that you would normally do a IPO and just the actual just GonNa Start. Trading today and you know I think that that allows you more time to create the right narrative the right story of and also separates what is a a pretty intense kind of crisis driven process the road show getting the company ready the SEC filings separating out at out you don't put all your eggs in one basket. You can do it in stages and I think more and more companies undertake that approach going forward. My question to is and I'm sure our listeners are curious is with all direct listings. There's no shares offered by the company when the when it debuts and so when we see these prices I, guess how much of them are they vanity metrics much of their HABITA- goals, how important are they for us to care about and think about? I wanted to be precise. So there are no new shares offered by the company. So there's no dilutive in an IPO generally have fifteen, maybe twenty percent new shares offered to the public. There are no new shares but many of the insiders have to pay taxes capital gains they actually do have to sell shares. So you know so far this morning already thirty five, million shares of have already been traded and We have on Pailin tear thirty, two, hundred, and thirty million. Shares sold today, right? So already, there's a market, there's clearly tens of millions of shares being sold. So these prices are real or Israel as any other IPO in which people are you know figuring out what's going to happen? You know the next checkpoint for both of these companies is gonNA come in a couple of weeks when they report their next quarterly earnings and I think by then you'll start to see the analysts get comfortable the companies understand the next steps and what's happening after. And you're speaking with Dustin Moskovitz later today the founder of Asana. So any questions on that? You can kind of tease out right now. Well, I was told. The pure folks. About our stock imagery because apparently no longer has sideburns to. Join, the Line of people that complain but it's like you know there's the old line about taking a haircut. Up Thirty, five percents of they actually gained hair on the market today speak. Clearly. sideburns maybe somewhere else. But? No I. THINK WE'RE GONNA be really interested because some unique company in which its founders, Dustin Moskovitz who Justin Rosenstein, who both met each other at facebook actually majority of the company outright right. We just never see or very rarely see tech companies where the founding to CEO's and and COO own like outright majority like not just a majority of the voting because of class, a class B shares but they just outright own about thirty two percent of the company I believe doesn't owns thirty six. Percent of the company outright and just knowns around sixteen point, one percent and so to me like I'm just curious because it's just a different path for a company it was a slower growth company capital much more efficiently grew much more methodically and the founders sort of maintained ownership over time in a way that most other founders do not think the other. The other thing to put out here is Asana has no lockup though the similar to spotify Ed to black as listing all the shares are available for trade to anyone. Who any insider anyone who owns a share of on this morning can put it on the market and sell it Here is the complete opposite pallares pioneering this new kind of fusion of the IPO and the direct listing one would argue maybe the worst of both of those processes but actually a direct listing with a lockup and so only roughly twenty eight to twenty nine percent of pollen. Tear shares are even available for sale at all with the rest in lockup and market standoff agreements that will expire over. The next calendar year. So you know there's a lot more to wait on right. There's not as much liquidity with Pallares could actually harm the stock price. They might be a little bit inflated right now because there's limited number of shares available for trade, we'll have to watch and see but again, it'll be interesting to see if other companies start to do a directing the lockup because clearly Palin tear has not suffered tremendously using this model. So again, another tool in the tool chest and uber do something similar with lock-up period. mean. They did like all IPO's. Underwriter from a bank, they have lockups in place mostly to make sure that there's not a mass rush to the exit. They don't want hundreds of millions of shares at any price willing to be sold. They WANNA, kinda manager coming out because they're putting oftentimes their own money up through the green shoe at stake, and so again, that's what made direct listings unique is that there wasn't this lockup employees are free to do on day one through whatever they don't have to wait six months as is customary. So again, we'll see kind of where the the system lies in the future. As you know, the New York Stock Exchange also got approval to do a direct. Listening with a capital fundraise so we've gone from this world of like there's an IPO and that's the only way to go public to. You can do a direct listing, a direct listening with a lockup, a direct listening without lockup address listening lock-up in a capital fundraise like you can do anything you want. You know it's it's the it's the Netflix of going public. So to speak I, see the headline now airbnb goes public through a through a pollen tear style direct listing. It's just going to happen and it's going to be horrible but we will be back here to talk about it as always every shareholder gets a free party house for one night so. That'll be the new innovation going on there, but but that's a sonnet that is Pelham Tear Ford they an and we'll have more to come in the next week.

spotify Natasha Mascarenas Pailin Dustin Moskovitz Danny Creighton founder New York Stock Banta appleby Wall Street Journal Vantaa Fanta Dot Laddis auditor airbnb Peletier Pailin
Equity Monday 09/14

Equity

08:48 min | 11 months ago

Equity Monday 09/14

"Does your start up to get a sock to report to close big deals or do you already have a sock to report and want to make it easier to maintain year after year Vantaa has built suffered. The makes it easier to both get and renew your sock to with anti. You avoid anxious auditor interviews and you don't have to capture hundreds of screen shots proving that you are sought to client to your auditor companies like Laddis user testing and hundreds of others have successfully gotten there sought to reports with Banta. appleby listeners can redeem thousand dollars off advances description by visiting fans dot com slash equity that's vanda dot com slash equity. Hello, this is Alex and you are listening to equity Monday for September fourteenth twenty twenty. Kicking off this morning disrupt starts today later today in fact, just this morning if you aren't coming, you're going to miss out. I. Am personally leading panels on how three former startups manage to reach one, hundred, million, a are, and another on the future of with three of my favorite investors it's going to be fun. Honestly I think the can be really well I'm proud of it and I didn't know what we're going to have by this time of the year but damn, it's GonNa be good. Stocks are set to open higher this morning after a somewhat lacklustre last week. If you didn't watch the stock market last week, it was kind of a mess and so to see this morning enthusiasm bodes well for American tech companies. If you care about such things also according to techcrunch Invidia this morning confirmed that intend to by chip design giant arm Holden's for a total of up to forty billion dollars mixing. Softbank which bought the company for thirty, two, billion in two, thousand, sixteen the Boards of all three parties have approved the outline of the deal. This has been a longtime coming in. If you care about chips, it's a big day. If you don't care about chips, it's still a big day because this deal really really matters and also this morning is a bunch of confusing tiktok news to get into so with that. That's what's going on in my head this morning. So welcome back to the workweek before we start equity is back on Youtube. You can check that out at YouTube dot com slash techcrunch for clips from the show, and of course, equity on twitter at Equity Pod, and with that, let's begin. Now approach any other weekend. The invidia sale news would have been the the biggest story of the weekend that we'd be focusing on. That would be the main thrust of this show that would be you know the water cooler talk in Silicon Valley but not this week because Tiktok there was just so much tick tock drama over the weekend that we have to go through in chronological order. So row with me here yesterday the thirteenth it was broadly reported that Microsoft had lost out in its bid for tiktok leaving Oracle, as the only bidder standing. And given that the sale had to go through on the US aside or the opposite going to be banned somehow I. It's the Oracle was going to win according to the Wall Street Journal at the time quote or is to be announced his tiktok trusted tech partner in the US, and the deal is likely not structured as an outright sale. Okay. Fair enough. So maybe Oracle is GonNa get some stuff, thrown its cloud and seem cool for the teens enough There was still regulatory stuff on the US side of workout to make that happen. But then super early this morning in my times at least tekkers reported the following and I quote what a whirlwind of a Monday morning shortly after news broke that Microsoft. Is Out of the picture in bidding for tick. Tock operations and rumors began circulating that Oracle is winner China's state broadcaster CG in reported that by Dan's will not sell tiktok US operations to Microsoft Oracle citing sources, and then there was an article in the South China morning. Post said that merely ticked algorithm, a key part of the social services to be clear is not for sale, but therefore, perhaps the rest of the applications US operations were anyways where does all this leave us well? With a possibly partial combination of Oracle and talks you know operations under threat from both the US and Chinese governments I. Mean What is it chance that that deal actually comes through normally I would say none but I didn't think Oracle was going to get this far. So I'm not going to go back on unelected and start squawking I will say. The scene two of the three global superpowers arguing over a social APP popular with teens is not where I thought twenty twenty was going. Then again, when has to twenty eight cents anyways more on this on dot com throughout the day we're getting down to the wire and so this all has to kind of shake out sometime soon. So why not now? Do Quick rounds this morning starting with one from the Insurance Technology Space I dig insure tech I've been covering a lot of companies that do ensure take this year because a lot of startups have been working in the space and a lot of VC's have been cutting checks so it has been constantly coming up. So Descartes underwriting has raised eighteen point five million dollars according to venture beat these startup is an insurance outfit unsurprisingly and according to crunch base is based in France and was founded back in twenty nineteen. Now according to venture beat, which wrote about the round descartes underwriting uses collects and analyzes all sorts of data to help insurers like understand risk. So I'm presuming that it brings kind of attack layer two more I. Don't know old fashioned insurance companies, which is pretty cool. Frankly ensure has been hot throughout all of twenty twenty with insurance marketplaces raising earlier this year and of course, limited a NEO trans- provider going public couple of months ago. So not a surprise to see another insurer tech round this morning, and then there was X. Or maybe zealotry entirely short which put together a seventy five, million dollars series ee start up provides an online marketplace for companies can find manufacturers across the world of excess capacity to build whatever they need according to Tech Wrench Dot Com T. Rowe price led the investment with a couple of new partners including durable. Partners, l, P, and Arrow mark. Partners essentially, this is a lot of late stage money showing up all at once and the kind of custom pieces that are facilitated by this platform back to the article include mechanical parts for aerospace and Defense Automotive Robotics and medical devices. My read here is that it's probably not the best time to be doing what? Does given the trade tensions between China and the US but that doesn't mean that supply chains or any less important or manufacturing any less critical. So they are probably in a pretty interesting market position at the same time it's a global world and two they're probably in high demand so. Seventy, five million dollars series ee. That's a big one. Now. Briefly before we wrap up as it is disrupt today and there's news breaking as I, record this, which I need to go check out and figure out what the hell is going on it. Also kind of came out this weekend that go jack and grab may merge according to the Financial Times. The Softbank backed companies are again holding combination chats. With the encouragement of their shared backer both go jack and grab of course, have raised billions of dollars have roots and ride hailing, and we're kind of part of the the big Uber era boom of money going into this sort of company. Now, twenty twenty has seen covid nineteen and it's related travel restrictions undercutting American ride hailing companies Uber and lift you've. Seen the earnings you know what's going on there right volumes tumbled. So how severe of an impact go jacking grab have kind of taken on isn't really clear, but probably isn't good according to the Financial Times that you've companies now offer kind of super APPs. These APPs do it lock instead of one application are both trading at a discount to their? Formal private evaluations. So it's not entirely clear actually what they will be worth as a combined company something less than you would think but also still quite a lot of money they are very rich firms and finally to close out the morning show was a bit lighter than lots of late stage valuation chats, Buyout Shenanigans a story from the American government. I was reading tech ranch this morning because that's how I started is kind of figure out what the hell happened over the last couple of days. The American government agency called the customs and border. Protection or see BP managed to claim victory over what? As shipment of counterfeit airports only they weren't counterfeit pilots. They were just headphones made by one plus not counterfeit at all, which is one of the funniest things I've ever heard in my entire life. And that was equity Monday for September Fourteenth Twenty Twenty I will see you at disrupt the speaker. We put together a huge great entertaining and useful show before he finally sign off a big thanks to the TC. And sales and production teams who have worked incredibly hard over the last six months to pull disrupt off I am both thankful and very excited. Follow the show on twitter at equity, Pot and myself on twitter at Alex and we are back later this week.

Twenty Twenty US Oracle twitter Microsoft Softbank Financial Times Alex Tiktok China auditor American government Vantaa Youtube techcrunch Laddis Banta. appleby
Laura Behrens Wu - When Digital and Physical Worlds Converge - [Founders Field Guide, EP.5]

Invest Like the Best

49:08 min | 9 months ago

Laura Behrens Wu - When Digital and Physical Worlds Converge - [Founders Field Guide, EP.5]

"This episode of funders feel God is brought to you by Microsoft for startups Microsoft for startups global program dedicated to helping enterprise ready be startups successfully scaled their companies. The program has been around for a couple of years, but I recently became intrigued when former invest like the best guest Jeff. Ma took over Microsoft for startups provides companies access to technology including azure cloud, and get hub coupled with a streamlined path to selling alongside Microsoft in their global partner ecosystem. Microsoft startup says it very compelling approach to working with startups and driving. Their long-term business value. If you're a founder running A. B. Two B. Company targeting the enterprise, you should definitely check them out at startups, dot Microsoft, dot com to hear more about the program stay tuned at the end of the episode to hear from me and current program member abnormal security. This episode is also brought to you by VENTA. Does your startup me to sock? To report to close big deals or do you already have a sock to report and want to make it easier to maintain Vantaa has built software that makes it easier to both get renew your sock to with vantage continuous monitoring solution. You avoid hosting auditors on site and taking screen shots to prove that you're compliant so you can focus on building Your Business Fanta. Partners with audit firms who file shocked to report directly inside Advanta at a fraction of the normal cost hundreds of companies including more than one hundred Y combinator businesses are leveraging vantage today to streamline compliance and focus on building their businesses founders. Still Guide Lizard can redeem a one thousand dollar off coupon advantage dot com forward slash patrick that's advantage dot com forward slash Patrick. Alone welcome everyone. I'm Patrick o'shaughnessy and this is founders field. Founders field guide is a series of conversations with founders, CEOS and operator spilling Greek businesses I. Believe we are all builders. Our own way in this series is dedicated stories and lessons from builders wall types. You can find more episodes at investor field guide DOT COM. Patrick o'shaughnessy if the CEO of Shaughnessy Asset, management? All opinions, expressed Patrick and podcast guests are solely their own opinions and do not reflect the opinion of o'shaughnessy asset management. This podcast is for informational purposes only and should not be relied upon as basis for investment decisions, clients, Shaughnessy Asset, management may maintain positions in the securities discussed in this podcast. Guess is Laura Baron Swoop Co founder and CEO of Shipu ship started in two thousand fourteen. After Laura, realized with her own ECOMMERCE startup that shipping was an incredibly difficult task for most merchants. So she said out the fix the problem for everyone. Schiphol let's merchants small and large user dashboard or is to simplify the shipping and tracking process. Our conversation focuses on Laura's background prior to ship how ship does business and business strategy evolved the inherent challenges of building shipping platform and the intersection of the physical digital worlds. I hope you enjoy our wide ranging conversation. Laura I was thinking of an interesting entry point for this conversation. I'm always interested by how entrepreneurs come across the problem space. They then spend their careers on you had started the company called popout prior to ship. Oh, I'd love to hear that story and how bad experience lead you to this problem that you're now building around in Chicago. That's a pass down. Memory Lane have thought about popout for a long time. What happened was I'm originally from Germany roughly six years ago I came to San Francisco I as a summer insurance to join Y combinator startup call. That brought me to the city initially working at door pre-series a, it was a team of twenty people we were working. Day and night to make sure that we're hitting the kinds of throws numbers that. Investors would be looking for. So it's amazing very energizing experience and I think coming German environment. Why was used a lot more hierarchy in the workplace is nothing like I've ever experienced I decided that I wanted to stay in. San Francisco full-time working here from there I. Think my next stop was given that I like the start of environment this much maybe there is a company that I can start down the road I. started brainstorming came up with a ton of different ideas I'd still have that spreadsheet somewhere the thought was really there are no bad ideas anything that I can come up. and. Choose to at the end of the day. I didn't have any super disruptive ideas site decided to keep it simple just get started with an ECOMMERCE business. That's what pop out. So I built a small e commerce business that was never mentioned anything big. It was a side project to do on the weekends as using shop affiars using stripe used all the existing building lots it wasn't supposed to be. Venture or scalable supposed to be a tool to teach me how to run a small company and then running small ECOMMERCE business. I realized that all of the different e commerce building logs are really easy at intuitive to use to put together. I've never done ecommerce before that, but it wasn't too difficult to figure out how to set up a shop a store strive to start selling on the Internet would. Came as a surprise to me was that shipping was much more difficult early on I. I. Walked to the USPS occasion the Fedex store and realized that first of all the people working there they're not super helpful. They're not going to give you any advice or tell you how to do things better. But then standing in line, there is a waste of time. These locations are only open between ten four so. These are normal working hours and then in addition to that when I started looking into technologies at these companies provide the interfaces were extremely clunky and you can imagine that if Fedex Api, UPS USPS API they're not as easy and simple to use as a striper full you API because he's companies they're not tech companies the really good at doing the complex logistics of shipping figuring out how to move packages across. The country across the world, but they're not good at building simple to use technology writing a documentation centre developer friendly from there. My realization was said it is too hard if it's hard for me than it's probably hard for other people as well. The founder used to work for yet this kind of cheesy shed that was built something that's a painkiller not vitamin from there I think putting these things together it. Is Hard for a type people. This is a giant pinpoint in Congress because every single needs to ship there's just no way around that at that point had had reconnected with a friend from college who has more technical than I. Am you decided to just jump on this opportunity and figure it out and sometimes we joke about that silver like at the beginning when I pitched Michael Founder. Simon this idea. Both of us he asked me is shipping something. You'd be excited to get out of bed for for the next ten fifteen years and I wasn't sure. He wasn't sure we weren't shipping logistics experts beforehand, but we decided to just give it a chai built MVP talk to some customers and see what happens and not get paralyzed by the sense certainty from there I think having talked to a few customers extremely. Obvious shipping is actually more exciting than we thought mostly because there's so many low hanging fruit. So many inefficiencies because this is such such an old business, and also because he congress has advanced at such a rapid pace that the discrepancy between these two industries, giant discrepancies that's the founding story. It's been more than five years by now getting out of bed every single day to work on shipping I haven't regretted. I love this idea of entering what is obviously an enormous market. A lot of times investors will do a lot of research on market size like pretty confident shipping's a massive market and growing like crazy. But in the face of a market that big I always wonder how founders approach what to do i. how do you decide what the first product will be so that you can stay focused and not try to solve every problem of a very old industry. So what did you start with? So before you get to that just double clicking on this being a giant market and I think a great piece of advice for founders. Giant markets are awesome but it's even better if this giant market is continuously expanding fresh when I looked at shipping or even today like shipping is growing like crazy because e commerce is still in its earlier days. So it's not an. Industry that's going away. It's giant pious continuously expanding and I think those are really really nice industries to begin to answer your question about what we decided to focus on. I. Think it was a little bit of a trial and error in hindsight everything seems like a fairly straightforward story with you read out there are Forbes. We started out just shutting with potential e-commerce customers, ECOMMERCE merchants our initial thought was there all of these different shipping ap is a really difficult to use the documentations terrible yesterday right into get API is the MVP was to build a wrapper around existing. API's trying to sell that to a few e commerce margins and when we approached. The congress margins I think especially the mid sized or larger ones. The first question they asked was how many packages going through a today at the beginning November Api we failed that we weren't able to get through that question that led us to going too much much smaller customers customers who are, let's say more desperate for better, more efficient, cheaper easier to use shipping technology go into much smaller customer. So mom-and-pop businesses, we encountered a different challenge actually the challenged with those customers was her super excited. They wanted help they need help that idea to shipping, but they had no idea what API was approached them with the wrong offering than kind of. Putting two and two together, and we decided to focus on businesses I. WE decided to build in to use user interface on top of our API to sell it to smaller businesses. So they need to learn how to integrate API started aggregating volume by aggregating ten of SMB's, and in the meantime was aggregated volume. We've been able to after larger and larger customers because by now able to say that we actually have a lot of packages going through API. That's how I would describe the progression of our focus at the beginning was really tiny mom and pop businesses before we started to go after and it came out of necessity, not necessarily a calculated decision. Could you describe for those early customers sort of what the experience was like for them to ship something before Shipu and then what it was like after what the change was A. Lot of our earliest customers they're using either the US interfaced directly. So USPS has an online interface on their website or were going to Fedex ups store so were just walking they're handing over there. Packages oster signing them up entrepot were able to do as we're able to pull in all of the orders from whatever platform they're selling on takes office. is an example for pulling those orders automatically into the road Ashford from there were creating shipman for them. We show them all the friendship ing rates, shipping options, recommend them the cheapest fastest whatever preferences they have, and then with one click fatter all labels Orlando anytime and another quake the postman comes to pick it up if x person comes to pick it up. So it's literally going from this kind of manual step-by-step process to two clicks print something put it on the package someone comes against it at the right time, and that's how you do everything and is integrated with you automatically push that stuff to them when they sell something because you can see when they're selling. That's right that's right and I think in the meantime, the has evolved quite a lot already. So I can talk about what it's like today and what we're thinking about for the future but really leads me back to motto of build something that's a painkiller not a vitamin I think when we approached the larger companies, they already had some sort of shipping options place. We could do a better they were not in such a big pain that they're willing to take risks to try unproven startup approached. The amount of pop businesses is just such a giant pinpoint that they didn't care that we've only been around for a few months. They just wanted help to solve this problem. In the early days, if you think back, what would you describe as the first big break that you got in your favor or something that happened that created a step change function in Your Business? What does that bring to mind? It was. I mean in hindsight again, very straightforward realization. But for us, it was realization that in addition to giving our customers access to very easy and simple to use analogy, they have a second challenge, which is they are too small to get access to any kind of shipping discounts or shipping rates, and they're also it's obvious to technology that's challenging for them is also going through sign up or account setup with all different shipping carriers and figuring out how to set up different accounts, kinds of rates qualify for how to. Compare rates. So we started the business we thought this would be a mostly in a Pi or board, and when we went deeper into the business, we realized that through economies of scale, we can remove another pinpoint for our customers, which is around account with carriers, and it gives us the additional advantage that we can aggregate volume, and then our customers access to better shipping rates before going into the business without something that we were aware of by now, this is a big part of our business model, the aggregation factor. SIP It more about that. Would you have one master account with each chipper by ship and then you're letting others participate in that master account basically so they don't even have to sign up each time. That's right. That's right. I think that's harder than you think it makes perfect sense that that's what it should be like when you sign up on ship, you shouldn't have to get your own Fedex or ups or USPS account in this industry. Is another known way to do business before we started pushing it adding some carriers were more open towards this kind of setup other carriers where are still more resistant there's a big argument to be made that this is a win win for both customers. They don't have to go through the site of process anymore but then also shipping providers don't have to do account management or customer support, and it's a easy customer acquisition channel for them. My friend Blake and I were talking yesterday about this thesis of just backing businesses that make it easy for other entrepreneurs to run their business and I love this idea of like a painkiller no-one's passionate about getting their packages somewhere. They're passionate about the product and I'm curious what you think this industry shipping industry looks like just more holistically that makes it so complex like why is this such an arcane strange read about these stuff with the postal service is kind of like, I, don't know what's going on here talk a bit about just the complexity and the history of shipping generally. First of all everything in ECOMMERCE happens online up until you need to shut and then shipping is the convergence of online and offline were these two worlds meet and you have to find a way to make them fit their real life people involved unpacking the boxes in figuring out what goes into which box and putting the shipping label on the box. So software needs to direct them to do all these things and you have to take the workflow of realized you point to account and then as a package is. On its way that's happening in the real world, and then we need to figure out how to translate what's going on in the real world back to the Internet and relay that to consumers into now merchants. That's where it gets complicated. I think it's different from payments or from text messaging there's a real life component to this. That's where it gets messy because you don't know what's going on. You have to find a way to figure out what's going on in the real world bring that back to the Internet. Sometimes. We have very strange era messages they're. INARA message that there's a delayed because the driver ran into a deer ran over a Dr. these are just very real-life occurrences that will happen and you have to figure out how to map that back to something that merchants and consumers understand. What looking back was like the most painful period of building to get through as you navigated this complex thing like if you had to rebuild ship from the ground part of it would be like, Oh God. I don't want to go through that. Again, I think what's making this industry really hard stuff were built on top of a bunch of other API. Still, we don't really control as we grow our business and expanding to more countries. We add even worshiping API, the mix and these different shipping. Companies Change Your API coins they don't really let us know when they do that. They have compliance certification things have come up once a year that we have to go through certification again when I say that on the one hand, the fact that we're doing all of this and customers still have to do all of this one by one is a big value for our customers. I think it is already a mode or a competitive advantage if we can do this well on the other hand it. is taking up of resources and it's tying them up to do something will split that into a bucket. A customers expect this to work, but they're not going to give you extra points. Exactly. They're not gonNA give you extra points for this work, but they'll be really pissed off if it doesn't work saw our engineers are tied up doing this kind of critical infrastructure work. We have to find carve-out engineering teams to be able to build new features functionalities that were actually excited about and make. Sure that we're able to balance boats. So that's the hardest arguments something that's never going to go away. It's expensive and it's sometimes mowing work. I always just remind our team members that if we're doing all this annoying work for our customers, our customers don't have to do it. That's exactly the point. Not every ECOMMERCE business should have to go through the challenge of figuring out ups endpoint. API endpoint changes one by one, but we're the buffer in between we can make sure that we take care of. Before we fast forward now to today kind of what you're building and what's changed for relieved. The kind of early aspects of Shipu what advice looking back would you have for others that are about to embark on that same early company Building Journey oftentimes talked to founders and I can see that they're overthinking just what they want to build and what's worked very well for me and my co founder said when we had an idea, we just started building and then other ideas come chateau today is nothing like what we started out with. If we remain paralysed trying to figure out what the best idea could be, we wouldn't have found this idea so. I think there's a lot to be said about just getting into actions starting to build something, and then you'll figure it out as you go. There is no shame around pivoting or changing your idea but I think that all of that is better than trying to overthinking I'm tying this into talking to customers as well. I think by talking to people to customer specifically like your ideas will evolve that's only back. One of the things I'm most interested in in technology and software world is how you decide to price your services in the early days. Talk me through that process and how it's evolved over time because it's just seems like pricing in software is such a difficult task. We're really bad at pricing. We didn't really treat it as a science. I think at the beginning even nowadays were looking for growth over anything else sort looking at pricing our product in a way that is attributing value to our softwares are merchants understand that are offered free were not trying to price it too high for merchants to not want to this a try. I'm saying this perspective that we're still mostly in essence focus. So everything that's public out there in terms of pricing is for us in vs however I think the difference between us in most other businesses that are software fees are only. Part of our business model, the other part is really our ability to resell discount shipping rates. So it says aggregation model that is more about what we're able to negotiate with shipping providers what kinds of rates were allowed to pass on to our customers to talk to you now about the evolution of product? So I think probably everyone listening can imagine this Great v one where it's like no longer hard now it's a couple of clicks and I put a thing on a package and I put it outside from they're talking about how you felt your way to the next set of things to be solved. Quite early on, we realized that our customers when they're using Shapiro, they held us accountable for if the FEDEX API now nor the ups who the USPS API so even though they knew that the shipping was done by the friendship ing providers that was not the issue while we're using the ship interface, a trusted our technology wanted were pissed off if something is not working and we couldn't point to let's say you as ps or Fedex that was not good enough. Of An excuse also not trust to accept. So we started investing into making sure that even though we're making use of the different shipping providers that were controlling the entire technology experienced that we're able to guarantee up time reliability making sure that we're able to return shipping rates and shipping labels even if carrier API's are down so that involve a lot of work around like storing our rates. Shipping rates are customers shipping rates on our own servers instead of calling upstream API's. Again harder than you think in our minds at least it was absolutely necessary before we started adding more customers and especially larger customers to our platform. We invested a bunch into the infrastructure and making sure that we're ready to scale that were selling something to larger customers that were actually proud of in. Then from there restarted thinking about expanding the platform that is a fairly common pollution in Saas companies you start by just selling something very simple a shipping interface shipping, API PAYMENTS API whatever that is, and then from there, you think about how else can we create value for the customers? What else? Do they need where are the other shipping related pinpoints. So now we are in that phase expanding the platform adding other products or other features to our platform and fresh for shipping specifically shipping. Touches a few things for the It can help merchant save money, but it can also help Martin's grow their businesses We're at right now I would call that turning from what we used to be. Let's say an aggregate her, we aggregated a ton of SNB's and offer them a fairly simple product. All we do is give them the right shipping label, and now we turn this into a platform and we have a nice mode already because we figured out how to. Acquire customers a scalable way, and now we can just solve more problems for them, which also translates into seldom or products I love that idea of aggregating the SNB demand and you just mentioned you figured out how to acquire them. I'm always interested in SNB space where sometimes you know like an expensive salesperson doesn't make sense how you solve that problem. How did you go to market originally and what have you learned about that distribution side of the business, which is so important. SMD's I. Mean Yeah. They said very different from enterprise clients. First of all, it's hard to figure out where they are. How do you reach someone I dunno knitting cat sweaters in the middle of America I how you market to them. So we at the beginning really nicely piggybacked on a bunch of super obvious SMP Agra. So as an example Sherifi has already aggregated hundreds of thousands of is a great place to start. We'll cover that same probably big commerce as well. So there are a bunch of known SMB aggregated out there that have ecosystems where you can participate at get customer referrals from that was our early customer acquisition strategy just piggybacking on existing as the aggregate. Shopping just starting to grow like crazy great customer acquisition Gel. Then of course, you run into the challenge of you have to have diversified revenue sources to be honest. Once you get to that point where you can think about diversifying revenue sources. It's a luxury problem to have. You're no longer in the bucket of there's not enough revenue we might die tomorrow good problem to have but that's the next problem I think what works very well with as well as when you have some early customers are really happy with your product Great Thousand Online merchants they have formed survey participated on. facebook where another channel where they recommend with already using word of mouth has been great Fraz, and then at some point, you realize that organic growth is just not going to cut it anymore. You've grown to a size where ganic gross has taken you there but it's not going to take you to the next level as your sem lets you went out. Content content is a big one and that ties very well into our mission. As well, making shipping easy bringing easy to read and accessible shipping content to ECOMMERCE. March. is a reflection of that. Now, I think paid has started to scale up nicely as well. You're trying to find ways to rain demand to your website and do that in a scalable way instead of trying to find customers one by one and hit them one one because to contract values or just not big enough to be worth US time. I love the idea of in the early days being almost like a pilot fish on another big aggregate talk to me a bit about shop affi-. So obviously, there's sort of this huge business that has a sort of similar mission to you enable merchants to do a better job. Have that literally work in the early days how do you make them a partner when you're small and they're big and how do you? Think about nurturing good relationships with sort of the eight hundred pound gorilla type firms that are adjacent to you and have the same sort of general interest is you there were two I think a lot of these larger companies were now starting to be in a similar position as well. At some point they realize they're lot of features that their customers are looking for, but they just can't keep up building all these. Features themselves plus it's not the core of their business might as well able third party developers to help out into create more value for the customer base. So that's I. Think Shopping is done that very well salesforce. Another awesome example is creating this APP store this ecosystem for other start ups, other developers to build services for their customer base, and that's what we did early on you can do that without a lot. Of contacts at these companies, anyone can submit an APP. After you go through approval process, we've been growing in those ecosystems. We started to get to know about the shock people, but I think early on is very nice merit based system anyone can build to their APP store and as soon as you've done that and you start getting positive reviews, y'all rhythm just lists you up front were word of mouth cakes in. Yet. So interesting that it's sort of a mutually beneficial relationships like if you're making the overall experience for their customer better, you're actually helping them grow exactly exactly and I think there's a lot to be said of the shop fight ecosystem the APP store ecosystem I think it's the most vibrant compared to all the other shopping carts builders out there. I think it is actually a big draw for merchants to figure out where they want to start building their website. As you think about the future now you sort of describe. Now where you're at today I guess going deeper into the problem space that your clients have or your customers have. How do you think about the three five, seven, ten year type plans? Do you think that way? Do you think that's a mistake to plan too much and just let it continue to grow organically how do you think about the future? There are a lot of things that you can't plan some not trying to figure out the exact product back for the next five ten years however there a few this underlying mechanisms of how this business works that we all need to understand in this business and then make decisions around those and for Chicago specifically, there are few fly wheels that are just in our favor. Our goal is to make sure. That, we keep fueling those fly wheels. The number one flywheel is one around shipping volumes. The more packages we should better are shipping rates are leveraged become with the carriers and were able to offer more attractive shipping options to our customers, acquire more customers faster and get worshiping volumes. That's really Nice flywheel and we've had by now five years of data to prove that this is a fi will works for ship. Were starting to roll the sound across most shipping providers out there. Now, I'm thinking about what's the next flight wheel what else is it our business? The other one that we've been excited about for really long time one around data, and I think this is now were a few companies ticket easier as they scale as they grow with our current scale were taken much more seriously by the different shipping providers that we were for. Five years ago this is easier for us now, and now that we've aggregated all of that shipping data from our customers and then we can build our product ways. They're more intelligent than we could do in the past. What I mean by that is we can start making recommendations to our customers around which shipping provider to choose. We can share with them benchmarks in from the shipping industry that we see across the board also. Tell them which have been provided in seeing delays for very specific routes, very specific service levels. So there is a lot of data driven optimization that we can start doing for our customers. We weren't able to do beforehand Michael is I think the reason why I'd say Amazon or Walmart is significantly better at shipping compared to sap is, of course, they have a much bigger engineering team and then on the other hand they just. have access to a lot more shipping data most have their own data said, there's not a lot of optimization they can do given their limited data said, we want to bring those kinds of shipping practices, the Walmarts, and the targets of the world. Actually Amazon, is one that I should call out. The amazons of the world can do bring those shipping practices to the masses and make sure that everyone has access to them with. Minimal cognitive overhead, they shouldn't have to think about it. We're doing the thinking we're analyzing the data. We tell them how to invest check at the most cost effective the fast way. Toby Lewke. The founder has the classic arm, the rebels line and you brought up Amazon not me. So I have to ask about them. So on a world where people consumer demand love how you said earlier like you don't get credit when stuff works you get yelled at when stuff breaks and consumer expectations we've just gotten greedy. We want our things and we want them. Now I know that you're built on top of other shipping providers united literally shipping things yourselves but how? Do you think about that competitive positioning where Amazon and other massive retailers can do their own infrastructure and you want to be competitive so that s can compete against them independently how do you think about that problem were you're sort of out of control? It's not really in your control, but nonetheless, it's an important thing for your business. Yeah. It's an interesting question. I think the reason why let's say that Masan Walmart can have their own shipping infrastructure is because they're pickup locations are. Very, predictable they know over there were houses are they know where to pick up from our customer base is spread all across the country and we're working with more than fifty thousand SMU's right now. So they're all across the US we can't pick up from fifty thousand different locations. So it's actually more cost effective travel other carriers do as I think this is where it gets interesting around it's getting a little obscure. But if we compare this to, let's say the airline industry. In the airline industry, we have dynamic pricing. So as the plane is full or about to get full, you're paying more than if the planet's half-empty on the shipping providers sight, there's no dynamic pricing. Everyone's always paying the same for the same package and I think we're as we grow instead of trying to figure out our own shipping provider. There are things we can do with the carriers to help them is to make sure that the right carrier is getting the right amount of. Averages for the capacity level that their ads you mentioned already one obvious competitive advantage that you're building in that original flywheel of your scale, being able to pass on more the price advantages to your customers, and obviously that keeps spinning. So I would call that like scale economies. How do you think about the other famous competitive advantages and whether or not? You deliberately try to cultivate them in your business you have time to sit back and do that sort of thing that's for. Investors to figure out I have a few investors have reminded me over the course of the year is that it's important to figure the salad and like F felt this annoying when they kept reminding me. But in hindsight I think is a good call out not a lot of time comes up for this kind of work because they today it's not pressing. It's not as if I have a meeting where I need to have understood all of my flywheel that I can't go into. Eating without that seems to be nice to have given our my daily schedule on my calendar. I'd have to deliberately carve out time to do that and I think it's become not easier to do. But maybe more important to do as we got to be a larger business early on it was all about survival. It's been a very deliberate shift of mindset for me. I'm becoming aware we're not just GONNA die tomorrow we're out of that phase we will die if I don't spend. Time on making sure that we have our longer term strategy in place and it might not be immediate death it used to be running out of money is like a slow death when someone else comes up and has a better strategy that's been interesting I think for founders at least for me, this was a hard transition to make just getting out of firefighting and getting out of that mode. I. Still Think were a small company when in reality we're not that solve accompanying why What is the best question that an investor ever asked you? So I can tell you what the worst question as. Counselor they're. The worst questions always would advance on buses. It's the worst question because you can ask us to any company you could acid to any company out there. You could ask what Amazon does is the best question it's simple specific. Actually I think there's always a question of what happens when our customers grow when our customers grow and become big enough to be using a three pl to even have their own warehouse when our shipping discounts might not be as relevant to them anymore compared to our technology advantages. How do we make sure that we don't have leaky bucket with our best customers? That's a very good question not because. The best answer to it because it's actually something to look out for in the future as we're willing to make sure that we don't have a key buck at at at at and. How would you describe your own superpowers as a founder or business leader and are those things that you try to focus your efforts around play to your strengths versus shore up areas where you're not as strong? In terms of character persistence is an underrated superpower and sounds gritty. It is gritty but I think could have given up a lot earlier. There were times in the business that worn fun. This'll come up also longer times in the business that we're in fun and especially when starting company be so persistent in making sure that you get to early proof points yet to people who believe in you enough to put money in. So persistence is a personal characteristic. I really appreciate also mit numbers and then what my strengths are again, I know more about what my? Weaknesses are that have hired for those weaknesses I'd say more high level than in the detail. So when I'm hiring for people looking for people who can just at this point at least had take the ideas that I have turn them into execution on the executing cited as fine as an individual contributor. Early on I think as the companies had this scale, they're much better. Executor's are able to figure out how to do this at the size of the business rat right now. Yes. Spent a lot of China this year hiring people who've been there done that. I'm fascinated to know how you think about choosing your customer. You mentioned at the beginning you thought about building this API and then realized that none of these SMB's new at that was. She had to build them a dashboard. If you go to your site now it appears you can choose you can access via API or you can get a simple software dashboard to us how do you think about doing both those things well at the same time and who is it that we talked about the dashboard and the small customers but who is it that uses the? This is the hardest question and operate in isn't an insanely hard. Because what we're looking at is roughly eighty percent of our customers just the amount of our customers are using the short together. Twenty percent of our shipping volume and then twenty percent of our customers are using the API doing eighty percent of the volume. So really hard challenge in terms of. The customers were using the API they're typically very much like stripe rightfully customers their tech companies. So everyone who's using an API? They're probably started. They have a few deaf resources in house and because of that, they're also stealing much faster sometimes like we've acquired a bunch of now large enterprise are mid size startups started with us when they were in Wiessee or even before pre-funding looking for a shipping. API. Once you've integrated shipping API unless really screw up, you're not going to erected out again everyone else. They don't know what any pin's never have any in house developers would be friction too much friction to teach them what API is. Talking. To friends the other day I think stripe. As an example, they're only selling to people know what is and then you've got a different company like square selling businesses that interface and we are trying to do both at once I. Think the upset here is how we've tried to minimize head is that our cash board is built on top of the API's basically climbed of the API. These are two different products but I think were completely right as we're talking about prayer transition day today in our company this is the hardest to prioritize from a product perspective. World Shipping obviously has gotten more complicated and more international kind of more global. If I was starting a new direct consumer brand based company I was planning on shipping a bunch of stuff. What would you want me to know about shipping that would be surprising or interesting? What are the things that new entrance into this space as ECOMMERCE companies maybe don't? Appreciate about what to expect here. Most people when they're getting started with any commerce business, they're mostly thinking about when an order comes in. How do I make sure that this order arise at the consumers doorstep that's the part about where you pronounce Shipping Label. Put It in a box make sure that it goes to the carrier in it's on its way. What we've been realizing over the course of the last four or five years of shipping comes in much earlier than when March actually needs to put a label on the box. Even before consumer chooses to buy at your store, they're looking at how much shipping shipping free as your free shipping threshold and consumers might not even by with you unless they're seeing the right shipping options at checkout are on the website most merchants think about shipping coming in after purchase would need it as a change in perception shipping comes in even before purchases being made, and again, this is something that's talked to us by Amazon Amazon prime those kinds of skyrocketing customer expectations. I always think founders have the best view of the ground of growing businesses especially, technology businesses, what are the most interesting winds of change that you sense in companies or other founding teams that you're friendly with or close with in terms of what businesses are being built and how they're being built there is one that I've been investigating that I just love so much I love farmers I love the disruption of the supply chain instead of consumers buying farm products are produce in grocery stores and seeing the trend of farmers coming direct to consumer as well on just letting. Consumers order from their own websites weigel will be a ordering to purple potatoes. From Hawaii, you can order just a ton of produce on the Internet get higher quality getting delivered to your door sometimes cheaper than buying it from the grocery store bypassing the grocer has been an interesting trend and farmers moving online becoming direct-to-consumer Hoddle. We literally just got our first misfits markets package at our house. Today really is interesting I. Love that answer of more middlemen being cut out seems to be like that is the trend worth watching less friction and steps between value and the customer. What are you most excited about for the future of kind of building this business and continuing to learn about this space. Another way of asking is, what do you not understand really well, yet today that you wish you did. We've only scratched the surface I don't want to downplay because we've done a lot but up until now, we're really just offering very simple products or customers, which is we give them shipping labels in a straightforward fashion as were thinking about what's next the majority of our competitors, all of our competitors they're making revenue by mostly this arbitrage model of the shipping discounts. How do we turn this really into much more of a software platform and again, not saying that we're not a software company today we are but how do we generate more software revenue by creating more value to our customers and grinning wore high margin products for customers that were reselling shipping rates and shipping labor arbitrage can always be the. Foundation of our format is awesome foundation to have as we grow up. How do we make sure that we start building almost standalone products when I look at early to companies that are very similar strive connect stripe relay stripe agnes, their fraud detection tool or folio has a bunch of separate product lines as well. How do we make sure that we can make that next step in the evolution and also I'm wondering what's up that no other shipping software company before us has been able to make that step. So maybe there is something that I don't know yet. That's making this particularly hard I'm optimistic. This is really not rocket science how come no one else has been able to make chefs. To be in the position of success already. So that I'm sure there's an interesting conversation or two to be had with whoever the developers are. That are your biggest API users asking them. What else is a pain in your ass? We could solve for the seems like a fun challenge. Yeah that's exactly. My closing question for everybody is to ask you for the kindest thing that anyone's ever done for you. One thing that comes to mind immediately that is work related, which is before I came to San Francisco to Internet lend up I was actually looking around for quite a while. To See if there are any infringement opportunities that I could find those using Angeles for that mostly didn't get any response at all is already starting to just accept that I wouldn't be able to come see San Francisco at end work for startup here by chance run into someone at a tech conference who happens to be A. Founder it was Zurich in your job within over coffee shared on the side, I'm trying to find an internship job in San Francisco. He just offered to four my resume to the West email lists. You didn't know me we only just met. that. that. He forwarded for me I think it got directly twenty seven responses ended up with internship job as lend none of us could have happened if it wasn't for that really friendly forward a female. Yeah. A great taste of how open minded the network in San Francisco is around introductions in your edmonds much more knit. They don't want to let you in as easily while in Silicon Valley reputedly just experienced people being really kind about opening up their networks for. Will I love this base in which you're operating? I loved the idea of solving weird sticky hard problems for customers learned a lot from our conversation. So thanks so much for your time. This episode was brought to you by Microsoft for startups. Microsoft, for startups is a global program dedicated to helping enterprise ready to be startup successfully scale their companies. In our five part miniseries, we were talking to Evan, riser, CEO of abnormal security about his experience with Microsoft startups. In this week's episode with Evan We. Talk about choosing to work with Microsoft for startups and his advice for B. Two B. Enterprise entrepreneurs. One of the things that always frustrates me is the term ai being thrown around like crazy an attached to seemingly every powerpoint deck and pitch to say a bit about what specifically that means to you guys I think. You are actually in a security company that has deploying actual machine learning techniques to improve your product safety words on on what you think about this buzzword and when it's relevant, it's not yeah. I. Mean all the tool right and you could also say sorting algorithms isn't sound quite as sexy and Harketting CEO US great soaring Algorithms at the end of the day like the customer doesn't really care about what technology. US They. Care about are you have training great solution to my problem when we talk to customers we try to not talk too much about our ai machine learning at least not at first because they've heard all the buzzwords before and their meaningless and said what we try to do to show people value as possible, and so when customers are able to install brockton one click and see meet results about all the attacks we've stopped in as a how'd you guys catch this like how is that possible? Then we explain okay well, it's actually AI system under the hood and here's the data that system is analyzing and trying to assess. In order to make this judgment internally in a I I company. But I think from a customer perspective is kind of noise. Right can be very distracting. It's we've found it much affected. Here's the case we solve. Here's the solution does you know try yourself because it's so easy to evaluate when there's super surprising impressed than we kind of peel back onion been explain what nominally techniques using to to deliver those results the partnership aspect of all of this with Microsoft in this case specifically but but more generally just plugging into existing ecosystems is really important for businesses like yours any closing thoughts on how you think about the progression Of Your Business and how it gets distributed over the next couple of years. Yes. So I think increasingly the there's been a huge explosion of new security stripes new it startups right and there are. There are some very good tools. Point solutions I think increasingly enterprises consolidate their into the cloud. They're also gonNA, CONSI- architectures, and they're gonNA want to have or at least concern into a single ecosystem, and so I think there's a lot of value that customers gets by only on top of the ecosystem already have which is just Microsoft. So proxy integrate really nicely to the entire tool set. That's a differentiation between different solutions and ultimate customers. Won't be enterprise ready means you really have to integrate into the way enterprises do work I think that is an increasingly standardized set of tools. We're seeing enterprise the more easy plan ecosystem whether it's technically right into EP is tools whether it's in through procurement where it all comes down like one bill and whether you can like discovery explore that from like the same resources whether it's Azure Marc Pleasure Microsoft sales, team they it's a big difference, ver- it and security. Buyers which are just pummeled by cold calls and cold emails all day. So I think that's GONNA be for us, invest as first class way of bringing our proxy enterprise and I suspect we'll see a lot more drops falling future while I've been I'm going to go from here until my CTO to make sure not being impersonated anywhere. Hopefully, it gives the on the azure stack as well use use your product. So thanks so much for your time. Today. To Find more episodes were sign up for our weekly summary visit investor field guide dot com. Thanks for listening to founders field.

founder Microsoft Fedex San Francisco US Amazon Chicago Patrick o'shaughnessy Congress partner painkiller CEO World Shipping Vantaa MVP Laura I co founder Germany Laura
99% Invisible: Their Dark Materials

Science Rules! with Bill Nye

44:27 min | 2 months ago

99% Invisible: Their Dark Materials

"This message comes from our sponsor. Three m who is using science and innovation to help the world respond to covid nineteen. Three implants are running around the clock producing more than ninety five million respirators per month in the us. Three m has also maximize production of other solutions including bio pharma. Filtration hand sanitizers and disinfectants. Learn more at three am dot com slash covid. Three m science applied to life song. We're all science people. We know it's a good idea because it's lasted. We could teach kids and they get it chemistry and biology here. It's in whiskey. It's an ice cream. It's in who you fall in love with the recipe for success. We can make the world better for everybody starting now. Welcome welcome to science rules. I'm your host bill nye. This is the show where science rules today. We are not a call in show in fact last week's episode with cliff johnson was the last show of the season but have no fear science rules. Who still here season shamisen while corey and i are busy recording interviews for next season. We've teamed up with some of our favorite shows from across the pot averse to bring you some truly great episodes where science roles recalling its science rules presents this week. We're featuring an episode of ninety nine percent invisible show about the hidden ways that design and architecture and technology shape the world around us. I learned a lot from a recent episode about black. It's a pigment that uses nanotechnology to trap. Nearly one hundred percent of light that hits it and it was created when trying to calibrate instruments to be used in space. So that's what you'll hear today. Hope you enjoyed if you do be sure to follow them. Wherever listen to science roles you can still send us your questions and ideas for the next season of science roles. Leave a voicemail. A two zero one. Four seven two zero seven eight five fill out our form at ask bill nye dot com or check me out on all the social media. I met bill nye on all those things. Without further ado science rules presents ninety nine percent invisible. Turn it up loud. This is ninety nine percent invisible. I'm roman mars about a year ago. We released an episode in which i interviewed the author. Kassian claire about her book. The secret lives of color was a conversation about the history and origins of different colors throughout human existence during our talk tasking. I covered everything from a type of purple. That squeezed from seems nails. Do a show green. That could literally kill you. But there was one pigment in particular from that episode that one of our producers here at nine hundred psi hasn't been able to stop thinking about because it's bonkers producer. Vivian lay it's called vanna black and it's a pigment that reaches the level of darkness. that's so intense. It's kind of setting. it's so black. it's like looking at a hole cut out of the universe. it's so black. It's like looking at a portal into another dimension of nothingness. It's so black. If you stare at it long enough you'll see your own death. I can keep going least metaphors or crummy but it's it's like this philosophical bis is just fall into it. This is adam rogers. I'm a journalist writer at wired. And i write books sometimes to rogers has written about phantom for wired. Because when anyone sees not just vivian. They think it's bonkers it makes you rethink what black needs phantom. Black is striking when you look at it. Even when you look at a picture of it it looks not like something is colored black. It looks like an absence then to black swallows nearly all visible light and gives back no reflection so every contour crease of whatever it's applied to disappears it has this odd effect of making something. Look two dimensional at the same time as if you could fall right through it. It has the same feeling looking at it as a color. That looking over the edge of a building or something does you actually do feel kind of physiological response to that does not look right. That looks unreal unreal. Vantaa black was created by the tech industry for the tech industry. But this strange dark material would actually go on to turn the art world on its head. They're black pigments out there and then there are super black pigments. That are so dark. They need to be created a laboratory. These super blacks reach such extreme levels of darkness because they're made up of something called carbon nanotubes or c. n. Tease carbon nanotubes are pretty much. Exactly what they sound like teeny tiny microscopic tubes comprised of carbon atoms. Just a few nanometers wide for reference. A single human hair is about eighty to one hundred thousand nanometers. Wide materials are made up of forests of these microscopic carbon tubes. I say it's like A field of gross. Okay and the is carbon nanotubes in the ballot one six thousands of thickness of your hair and there's about a billion of them per square centimeter. This is ben. Johnson the founder and cto of surrey. Nanna systems which specializes in carbon nanotubes technology. He's the kind of person who even as a kid. You'd expect to become the founder and ceo of carbon nanotubes technology company. When i went through school i spent my time trying to make gunpowder type brokers And then i kind of went to develop liquid propellant systems. That were rather dangerous and used to go bang and kind of not very safe back then. People didn't really care that much about safety and they go yeah. This sounds like a really cool idea. This is not a really cool idea. Jensen began working in the nanomaterials field. In two thousand four back then santiz had a lot of promise in the space industry because super black coatings could be really useful inside of satellites telescopes and optical imaging technology but carbon nanotubes. Technology wasn't quite where it needed to be yet. Cnt's weren't like paint. They had to be grown onto a surface in a special type of reactor at an absurdly high temperature. High enough to destroy most of the things you might wanna grow them on jensen and his team worked on for years and finally managed to develop a new reactor that allowed them to grow see and teased at a much lower temperature and in doing so. They had one unexpected but delightful side effect. They made it blacker one day. We got a data back said. Do you realize what you've done. You've grown this material. And it's got almost on measurably low reflectance and i was a. What does that me. It meant that serena systems had created the darkest substance on earth material that absorbed ninety nine point nine six five percent of light. He couldn't tell from the numbers but jensen new. The cat was really special after one of his researchers showed him a sample coke. And i'm like okay. what am i looking at. It just looks black and he said look. I'm putting face right up beside it and the guy's looking laughing at me just looks black. And then he did something that just told me we'd nailed it. He took an object of the surface. That was three dimensional. So i then see it before no matter how. Close my eyes to it. I couldn't tell anything that it was. Just flat dance. Black was so dark that it almost felt like defied the laws of physics. We weren't looking to create. The world's blackish material wasn't things jensen and his team decided to give this new flashy c. n. t. of fleshy name. A black which stands for vertically aligned nanno to array black as black as vance a black was surinam systems still saw it as a niche material. So when they launched their product at the farnborough airshow in two thousand fourteen. They saw themselves as small fry. Farm bureau is a big deal. In the aerospace industry serena systems presenting their nanomaterial. At the same event as the boeing dreamliner military jets and a paragliding car so jensen wasn't expecting to make much of a splash. But that's not what actually happened was just surreal. We had camera crews from literally all the major networks. They're filming looking at these materials because no one had ever seen anything demonstrated like this before people were freaking out over black. We just didn't expect and my son was like well. It's just black. Why are we getting these people going crazy about it. People were amazed by the depth of darkness achieved by anti-black and wanted to know more. Soon enough serena systems was receiving all sorts of requests from people who wanted a piece of people wanting to their cars. People want to coat dice coat. Their bodies we had a very well known youtuber. Spent quite a while asking us same can can you please eat live on youtube. Aside from that time potty canadian what really caught jensen's attention was the amount of interest that came from another field in desperate need of a super black pigment. The art world in those first. Couple of weeks alone serena systems received over four hundred inquiries from artists wanting to use it in their work. The number of people in the art world that wanted to use that. That was absolutely crazy time. Actually because we're a company set up to do engineering space not accompany the setup to create products for artists to us. Working with artists was just not something during an assistance was equipped to do because vance black was incredibly hard to work with sure. They could grow at a much lower temperature than before. That was still about four hundred and thirty degrees centigrade. Cnt's were also really delicate and could scrape off easily but most importantly any collaboration with artists would take up time in tech resources because anything coated with black would have to be grown in serino systems reactors just wasn't a practical proposition for the company that said an ish is an incredibly charismatic chat with amazing vision and his life's work has just been phenomenal and each as in a niche kapoor. Who if you haven't heard of him before is famous so an easter for decades has been one of the premier contemporary artists working today. Adam rogers again. He's the kind of person who will do like a whole gallery takeover the teen modern. He's he's a a really big deal. We should note here that each or did not respond to an interview request for this story. But he's best known for creating chicago's iconic cloud gate sculpture also known as the bean and he has been knighted by queen elizabeth for his contributions to visual arts. And when vance a black debuted he wanted it. So he reached out serena systems and invited jensen to check out studio walked into his studio and was literally speeches or what i saw given his body of work. Kapoor seemed uniquely suited for this material. There is in a way a constant continuous process that gives up the same questions. This is each kapoor. In a video he released about one of his pieces titled dissension those questions for me. The void object or the non many questions about car questions about space and time. Because i really do believe that for there to be new objects that has to be new space. Kapoor has a fascination with blacks capacity to make something both exist and not exist at the same time his work. A lot of it deals with void deals with collar. Blocks voids tries to understand the relationship between color and space one art installation titled descent into limbo is just a giant black hole in the ground. That looks like it plummets. Into oblivion there was a circle on the florida it was just blacker than black to possibly be couple years ago somebody actually fell into it now to the italian man who found out the hard way that are very realistic. Looking painting of a black hole was in fact an actual black hole. Fortunately the man who tested the art out is going to be okay. He's now at home recovering. From a back injury serena systems couldn't work with four hundred different artists but they could work with one. Kapoor was the perfect twice. They signed a contract with kapoor stating he would be the first and only artist who would get to work with phantom. Black surrey systems already had all sorts of exclusive licenses with contractors in the defense and space industries. So they figured an artist license wouldn't be that different. It's not implausible that siri nanna systems. Thought that the deal was the same as any other deal that they would make with anybody else wanted to use one of the things that they that nobody else in the world could make. That's not crazy but it did have consequences consequences that rocked the art world. We had expected when we announced it was exclusive that it would limit the amount of request we were getting because the the the administration stuff within the company was simply bombarded overloaded with requests from the art world. Sadly not once again people were freaking out over vanna black but for very different reason this time at first people thought that somehow initiative poor had the exclusive license to the color black which was obviously not true and that created a forest form of hatred. And i think back to that time and we were getting hate mail. Death threats all kinds of crazy stuff. You know where the internet's like winter black is technology that can only be achieved using sereno systems proprietary reactor and trained technicians. It is not a color gets a technology. They didn't patent shade of black. That absorbs ninety nine point nine six five percent light they patented process and material that absorbed ninety nine point nine six five percent of light. Still a lot of people thought that technology was beside the point. So we're talking about ship of no light. So how can someone own no light. This is stuart simple. An artist based in bournemouth in the uk undestood quite quickly. How elaborate close to use the stuff but didn't change how this exclusive arrangement. The attached initially stewart was really excited when he first heard about phantom black even though he wasn't sure what he would make with it. I wasn't really thinking about how it use it. I mean i was initially just or the stuff itself. I hadn't really go ideas. Because by the time i had a chance to hatch day for it turned out in each kapoor will have the rights to it and everything else. Store actually. doesn't blame. Serena systems for choosing to work with initiative poor. They came from the world of tech and had a completely different mindset. The object of his frustration was a east kapoor. Stewart thinks morally as artist. Kapoor should have known better than to try to keep vantaa black exclusively for himself historically and presently so much of art has been dependent on new technology from oil painting photography video art evolves with whatever's technologically possible. So the fact that this new material was purposefully. Being withheld from the rest of the artistic community ruffled a lot of feathers including stored symbols just smacked of complete world elitism and the power to dominate things. If you've got money in stature. Although ben johnson from surrey systems is quick to point out that artists being protective of technology isn't actually a new thing. In the art world artists have been creating their own oil paint since the renaissance and they were under no obligation to share their material with their competitors. Today people feel if something exists. They have an automatic right to it So because we created this material everybody has an automatic right to it. The reality is the world has never been like that. You go back to in turn. It was creating his blacks and you go out to say. Hey you created an amazing black i wanted. You would have been laughed out of the art scene but simple susa- it a different way. Regardless of what renaissance artists did. He believes that sharing knowledge and technology can only move the arts community forward which is why he actually felt a little hypocritical. Store had been mixing his own paints and pigments for years to use his own artwork and he realized he was a practicing what he preached better than him. Because i've been making these colors and just using them for myself. I've been holding them from my own walk. I wasn't sharing them. Stewart had a bunch of pigments that he created and self the green screen. The pink is pink glittery glitter. You get the idea. And it occurred to him that he could kill two birds with one stone. He could share his colors with his artistic peers. And poke a little fun at a new report exclusive. Licensed advanta black. So i well davies. I'll share my pink pink made with the whole world and put it on the internet as a joke is a piece of performance. If you like to use the internet space for debate in dialogue with one caveat everyone in the world could use this new color except in east kapoor. Buying caputo from using my payne stewart. One of his colors the pink pink up for sale on his website with a very specific purchasing agreement to buy the pink is pink. You have to agree to legal terms and conditions on the website when you had to car and they are that you're not an each kapoor you're in no way associated or affiliated to initiative for and the best of your knowledge information and belief the paint will make its way into the hands finish kapoor. The move was part joke part performance art. He'd figured a few friends would buy some and they'd have a good laugh about it but he ended up selling tens of thousands of jars of the pincus pink. Each one a tiny middle finger to kapoor things escalated quickly from their kapoor comes back posted a picture of him giving the middle finger to the camera with his finger coated in this pink in in samples. Pink adam rogers again. An issue kapoor had somehow managed to get around stewart's ironclad user agreement and posted a picture to his instagram account of his middle finger covered in the pink pink so this is like a so this like teenagers fighting. They're having a fine on social media. I didn't think it was actually in each also. Just it was someone having a joke. But then when i realized it walls him us i oh my god. That's really really bad. It was bad but it was also good for stewart. He got one of the most prominent artists in the industry to publicly flip him the bird and now he had the internet on his side. The rest of the artistic community in thousands of thousands comments was like if you right back buddy. Commenters piled onto a niche kapoor's instagram. Post telling him to hashtag share. The black stewart suddenly found himself with an army of open source art defenders behind him and he was ready to mount a full scale attack and store. Clic captured that vibe. He he thought well okay. If that's the way it's going to be we're gonna. I'm gonna make a better. So we decided to beat kapoor at his own game and create a super black paint that could rival to block. It took years of development and multiple iterations an entire community of crowd sourced artists being back to develop the formula for something that he calls black three grabbing in the cosmetics industry. We used what we call matter fires so he borrowed some technology and then we reformulated the binder to make really open them really blight so we could cram later this black pigment. That which makes this really super blind koumas valvert thing. Like three doesn't trap as much light as van to black but still pretty dark. You can imagine what it's like in the justice league next superman but i have some very strong is still very strong. Black three is like uncle men. It's fine sort. Made sure it was an acrylic paint because any painter would be able to easily work with it. It's also affordable so that artists can actually buy it. And lastly you come by blank three if you're initiative pool caputo if you're associated with an itch kapoor will to the best of your knowledge information and belief is going to make its way into the hands of each caputo. These poor wouldn't be painting with black three anytime soon but as it turns out neither would stewart. Simple stay black for my work. A half i can't use it. It's to black the minute you put on a painting. It just dominates everything. After all the feuding research and development and sheer painstaking work that went into creating one of the world's blackest blacks stewart doesn't use it and oddly. Enough a niche kapoor. The person who set off this whole controversy in the first place hasn't used his blackest black very much either a few years back a limited edition ninety eight thousand dollars vance black watch. But that's about it. Neither simple nor kapoor had much use in having the darkest pigment in the world but there was one artist who actually did hello. That's me lows. And i talk to you. Deem streep works at the intersection of art and science. And recently she came out of nowhere with the black pigment that rendered the entire feud between kapoor simple pretty much meaningless and the best part is she didn't even mean to my artwork in this setting really triggered a scientific discovery which is unusual in these times. Usually artistic work would not trigger scientific paper but in this case it was really came out of the arts and i thought this was really cool. In twenty nineteen streeb released a work called the redemption of vanity in which she coded a two million dollar diamond. In a new nanotubes material developed with. Mit's next lab. It's a critique of material value because the diamonds value is visually speaking reduced to nothing. Diamond and carbon nanotubes are two forms of carbon atoms in a different. That means that you have the most brightest materia end. The most blacks material basically generated from the same element. This new carbon nanotubes material created for streep actually unseated to block. As the new black material in the world it traps and astronomical ninety nine point nine percent of light as compared to vanda plaques ninety nine point nine six percent which is ironic because the only reason she developed a blacker black than a niche pours is because of a niche kapoor. Had it not been for the exclusive license with kapoor. mit and streep's new record breaking material might not exist by choosing not to work with other artists surrey. Nanna systems unintentionally inspired arrival super black material. That beat their record. But streep says she wasn't trying to one up surrey nano systems. Were make a statement to unleash. Poor everything she was just trying to move past the bickering and create art. I like ought to be free and a speak through his conceptual powers and aesthetics. I do not. I'm not interested in raising the more fingertip to honest papa or anybody else. A niche kapoor still has the exclusive rights to use phantom black in his artwork and it's unclear whether he's planning on releasing any future pieces using the material. Actually his most recent exhibition couldn't be any further away from black. It's a series of mirrored sculptures better almost impossibly reflective these days stewart simple has a new giant to slay. He's taken on t. Mobile the company has been sending cease and desist to small businesses using similar shea to their trademark pink. So in protest. He's released a new pigment that he calls pink. Tm it's an exact color match to team opals and it's available to anyone unless they are in any way affiliated with t. Mobile ben johnson is still at serena systems developing newer iterations of anti-black that are not exclusive to any artist but he seemed a little hesitant to work with artists again. I just recognized that as a company of focus is not the business of he seems pretty content to return to his humble childhood ambitions of blasting super cool things into space. Personally i love the space business. I just absolutely love it. I started as a young kid to build space rockets and today we have materials that we create orbiting the earth. And i cannot tell you how that makes me feel. This little kid was looking at the moon on dog lights in. God wants to send something up space to today We actually send stuff into space as for the black that came out of. Mit demoted. Streep knows that this isn't going to be the end. all be all for the world starkest pigment. another material will eventually come along and their reign as the blackest black. But what's important distribute next lab. Isn't that their materials the darkest but that it's available to the rest of the art world so for now. The blackest black is open to any artist to use including any kapoor What's the opposite advanced. Black manta white. Actually that's not the answer but we do have a story about a color pigment. that is so desirable. It was at the center of a case of economic espionage. Adam rogers comes back to tell me that story after the break. Kiwi co create supercrew accessible hands on projects designed to expose kids of all ages two concepts in steam science technology engineering. Art and math corey. Yes kiwi co believes in the power of kids and that small lessons today can mean big world changing ideas tomorrow. Crates are designed by experts tested by kids and they teach news steam concepts. Each box is delivered monthly and comes with all the supplies needed for that months project. Plus detailed kid-friendly instructions and an enriching magazine filled with content to learn more about that crates theme the different lines cater to different age groups and there are a variety of topics. Plus the crate includes everything you need. So you don't have to worry about running out for extra supplies you know what's the best way to start spring break when you're a kid a threat getting a package in the mail that's just for you cory Yes and parents need love. Having projects to supplement online schooling by providing hands on learning opportunities hands on corey. That's the key discover engaging science and art projects for kids of all ages you to learn the science behind hydraulics build walking robot seattle high. You can make rocket. Fly everything you need to make steam seriously fun. Delivered to your doorstep. Get thirty percent off your first month. Plus free shipping on any great line with code science rules. That's thirty percent off your first month at k. I w ico kiko dot com promo code science rules. You probably already know this. But i'm a huge fan of reading. I tend to read a lot of non-fiction. You know science stuff. But i'm trying to branch out well bill. There's only one place. I need to go to find a wide variety of titles to read and i don't even need to leave my house. Scrubbed script as the ultimate reading subscription service letting explore all of your interests in any format. You choose books audiobooks magazines and more for only nine ninety nine a month. That's us currency only nine hundred ninety nine a month. Yes you heard that right. You get an entire library for less than the cost of a single book. No complicated credits. Additional purchases are required. Not sure what to read. Screamed combines the latest technology with the best human minds to recommend content that you'll love and if you're a book hopper as i am you're free to switch between titles genres and formats at anytime on your phone your tablet or your computer as you may know. I'm kind of a fan of the sci fi classics and some of my favorite titles on script are those kinds of books. Like jules verne's journey to the center of the earth or jr tolkien's the summer million. Muck osama habat come on. I'm i'm a sophisticated person. Neo gamons american gods and for some nonfiction. There's always a little book called undeniable by bill nye and and corey s power. What right now. Script is offering science rules listeners of free sixty day trial go to try dot sk ribbed slash science rules for your free trial. That's tried dot. S cri de dot com slash science rules to get sixty days of script for free one of the big takeaways of the vantage block. Story is that there is color all around us but we don't really put a lot of thought into the process of creating journalist. Adam rogers who we heard from in the story and who's writing a whole book about colors came into the studio to talk to me about the technology behind another pigment that was so sought after that it was at the center of the fbi investigation. You may not have heard of it before but teams are. You haven't gone a day. Maybe an hour about coming into contact. With titanium dioxide the coolest thing about titanium dioxide is everyone interacts with it all the time. Yeah because it is primarily. It's the thing that makes almost every human made thing white white. If you see what i meant. Yeah it'll confer a an almost platonic principle of whiteness things. It'll it'll convey opacity and brightness as well so you find it in other colors other other pigment house paints like forty percent titanium to acts no matter what color they are even. If they're red but i tend to i in a bunch of different colors as well as being like in a tube of titanium white oil paint would buy if you get the real stuff. There was a story that may be apocryphal The during the cold war the west had more access detainment acci russia block affiliated. So you were supposed to be able to see one of the reasons that the like behind the berlin wall things look kind of dingy and dim and not as saturated was their pants. As they got older they would show through more. They didn't have as much titanium dioxide or they weren't using titanium dioxide but the west was so so when you would walk through the brandenburg gate in the west would be all bright and beautiful and there was more color it was it was because of that that may be apocryphal. But i love the story much works for me and and it's even food right. Yeah a lot of food especially the things like oreo filling. I think they don't use it anymore. Something like a like a lifesaver or like sprinkles on cupcakes very lot. It's i teamed oxide those pharmaceuticals pills like almost every pill if you have pills in your medicine cabinet that shaving cream for shaving cream. The big one The porcelains You know the the the things that are in If you walk around your kitchen in your bathroom a lot of those services and a lot of the small objects are you will see t t to on that on that ingredient label. How is titanium dioxide discovered. Well titanium was actually discovered that the element very haman ninth most common in the earth's crust discovered in in delete of a mill. That's the little the stream that you sort of. Cut the side channel from river To go through a mill. Nobody knew what to do with it. Nobody knew where it was four but In the late eighteen hundreds an engineer named aj rossy Was playing with it. Because he had encountered at trying to make steel from the iron bearing ores of adirondacks. Nobody knew if you could use it to make that steel better. He started a company thought he could and he and to do it. He needs a lot of power to get to make the furnace as hot enough to make this work so to what sort of the silicon valley of the late eighteen hundreds early nineteen hundreds which was niagara falls because of all the power because all the power right okay so the hydro electric power right so he was doing electric chemistry. Oh cool and this is the place where like union. Carbide started if you wanted to do this. Weird al chemical magical chemistry that need a auto power you could crack open minerals crack open doors and mix them together in new ways. So we're all these companies started up niagara falls. His was one of them. But at one point in the process he one of the byproducts of the process was titanium dioxide would precipitate out as this beautiful bright white powder and rossi was smart enough to know that there was a huge demand at that moment for something to replace. What was the classic breitner narrow pacifier and white pigment since antiquity which was led to discover the shortcomings of lead. Yes yes but he sees his wife he he goes. I know what this could do. Potential any mix it with salad oil. Okay and he runs his finger across. It puts his finger in it runs in a piece of paper. It's this beautiful white. And he says the got it got it and he starts a company get sort of suspended by world war one but once. that's over. He's the only kind town. The norwegians come up with a process to and now there's this way to make titanium dioxide and it becomes ubiquitous in human industry. How big of an industry is titanium. It varies but i think right now. It's like a four billion dollar. A year industry and i forget the amounts know some hundreds of to e cargo units a year. But that doesn't seem like a lot if you know how much cash apple has on hand or something. But it's minute amount of veteran everything that we touch every day almost everything that we touch every day and and so to me that makes it one of those invisible of things that we touch that makes the world look the does since it was discovered. There have been these various methods to make it tell me about the process that rossi figured out and one that was in place really until kind of around world little before world war two was called the sulfide process. It's really gross. Really dirty requires sulfuric acid and requires a fairly pure or to turn into titanium dioxide. And it's not very efficient in the thirties. A chemist named polka figured out a way to use hydrochloric acid so the chloride process was born complicated industrial process that uses really big factories that look like steam punk started stores. They're fantastic when they're amazing. He figures that out that process becomes the de facto. you can use kind of dirtier oars and it's more efficient better way to make this stuff and through various waves of acquisitions and purchases. This becomes the property of dupont right. So dupont becomes the main purveyor of chloride process titanium dioxide for the world essentially and And that becomes sort of de facto standard. So there's continual evolution of how to make better and cleaner titanium dioxide and this eventually leads to a big intellectual property case. So tell me about that and how that got started. So the mid two thousand dupont goes to the fbi and says listen. We're pretty sure somebody has stolen or chloride process for making titanium dioxide. We're pretty sure we know who. We're pretty sure we know who is selling it to the fbi. Which has just started not by coincidence. An economic espionage office in silicon valley Because there because congress has just passed the first economic espionage act essentially because they are worried about the same thing dupont. Which is that. China is trying to take p from american companies. I see okay. So dupont goes to the fbi and says we're pretty sure that this dude named walter. Lou is selling our chloride process for building factories for making or into titanium dioxide to the chinese government. And how did walter lou get his hands on me dupont. Method while they're lou. According to later trial documents spoil that a little bit down his way to a state. Dinner in china where he kind of promised that he knew how to make stuff that was on a list that the chinese government said. Gosh we'd sure like it if somebody could teach us how to do this stuff for chinese industrial reasons. That'd be great. They kinda showed him the list and he was like totally can make you guys titanium dioxide with his buddies or nudging going walter we make dioxide like it's fine. We're and we're lou eventually ended up doing with the fbi. Eventually understood lou to end up doing was finding a couple of this is this is more. I mean to sound but essentially finding a couple of disgruntled ex dupont. Employees engineers who help develop and deploy the court process factories that to build in the us and other countries who had left the company unhappy and with their boxes of stuff and with those he kind of loose started in in in the mission. San francisco star little store front office where he processed that information and sold it to the chinese. How does dupont figure this out. And then how does the fbi start to stitch together. The case dupont was cagey with how they figured it out. Even with the fbi or the fbi was cagey with me. About how dupont. It told them they you has. Its own internal security. They're very worried about this kind of stuff but they found out somehow they they said to the fbi. We think it's this guy and the fbi started surveillance and and looked into both the people who lose working with on the east coast in delaware his office here and eventually got enough evidence to say we are pretty sure that he's the guy and we're pretty sure that he's about having meeting with his chinese contacts in k. And we're pretty sure that they're staying at a crummy hotel and alameda and they in conjunction with a relatively new. Us attorney in san francisco. Who really wanted to get some action out of this office figured out how to mount a bi coastal multi place exercise search warrants on everybody all at once hundreds of agents deployed and i mean so so this is a huge is. The is the first case of executed in the as it was the first. It was the first prosecutor under the economic espionage. Act yeah and then. So what is What ended up as a result was convicted. He was convicted and still in prison. They never found the money. The money that the chinese government turned out had paid walter and his family and china has an active process. Eighteen oxide processing business out. Because they had this kind of crummy for your or way to make an inch titanium dioxide and now they do because of Because of ultra loop perhaps perhaps they figured on maybe and yes big for a pigment for a caller to be able to color. And i just love the whole the whole premise of the black story in this story where i love about. It is the idea of color s technology. Like that is a very. I think that's a strange notion to people. I think it's a strange notion to. But lemme lemme. Yes and you know. It's always been technology soar. There's this there's the experience that a living thing. We'll have a colored world world of color because a lot of the things that are alive on the planet have ways of interacting with you know the physics of the electromagnetic spectrum that include the part of it that we call visible because for us. It's the visible part right. But there's a moment in human history where we take probably iron ores probably over. Take this rock crunch it up. Mix it with rebecca fat from some animals backbone and smear it on cable or smeared on thing that we make not just to protect it against mosquitos which is possibly thing that it does not just a glued together which is another thing that maybe ochre pope does to make a design vokes. Something probably read although might have been black and it might have been white whites. The thing that doesn't last as long as it's hard to know at that moment like our interaction with the colored universe becomes one of technic as well becomes a technological interaction. Ninety nine percent invisible was produced this week by les mix and tech production by schrief. Yousef music. by sean. Rail can you. Mingle is our senior producer. Kirk kolstad is the digital director. The residue team is gerald avery. Allman joe rosenberg delaney hall crisp arrupe sophia classical and me roman mars special. Thanks to adam. Rogers when his book about colored comes out we will shout it from the rooftops. In the meantime you can read historians about science in miscellaneous gallery at wired. We are a product of ninety one point seven. Klw in san francisco in produced on radio row in beautiful downtown oakland california ninety nine percent. Invisible is a member of radio. Tokyo from pri so fiercely independent collective of the most innovative shows in all podcasting find mall at radio. Topa dot fm. You can find the show and join discussions about the show on facebook to at roman mars and the show at ninety nine. Pi org run instagram. And read it to you. Wanna see a video of people freaking out when they see banda black for the first time you should go to ny p i dot org stitcher.

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Rahul Vohra - Using Emotion to Design Great Products - [Founders Field Guide, EP.1]

Invest Like the Best

1:19:50 hr | 10 months ago

Rahul Vohra - Using Emotion to Design Great Products - [Founders Field Guide, EP.1]

"This episode of Founders Feel God is brought to you by Microsoft for startups Microsoft for startups global program dedicated to helping enterprise ready be startups successfully scaled their companies. The program has been around for a couple of years, but I recently became intrigued when former invest like the best guest Jeff Ma took over. Microsoft for startups provides companies access to technology including azure cloud and get hub coupled with a streamlined path to selling alongside Microsoft in their global partner ecosystem. Microsoft startup says it very compelling approach to working with startups and driving. Their. long-term business value. If you're a founder running a B. Two B. Company targeting the enterprise, you should definitely check them out at startups dot Microsoft Dot Com to hear more about the program. Stay tuned at the end of the episode to hear from me and current program member abnormal security. This episode is also brought to you by Venta does your startup me to? Sock to report to close big deals or do you already have a sock to report and want to make it easier to maintain Vantaa has built software that makes it easier to get renew your sock to with vantage continuous monitoring solution. You avoid hosting auditors on site and taking screen shots to prove that you're compliant. So you can focus on building Your Business Fanta. Partners with audit firms who file shocked to report directly inside advantage at a fraction of the normal cost hundreds of companies including more than one hundred Y combinator businesses are leveraging vantage today to streamline compliance and focus on building their businesses founders guide lizard can redeem a one thousand dollar off coupon advantage dot com forward slash patrick that's advantage dot com forward slash Patrick. Alone welcome everyone I'm Patrick o'shaughnessy and this is founders field. Founders. Field Guide is a series of conversations with founders, CEOS, and operator spilling Greek businesses, I believe we are all builders in our own way in this series is dedicated stories and lessons from builders of all types you can find more episodes at investor field guide. DOT, com. Patrick o'shaughnessy, CEO of Shaughnessy, asset management, all opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of o'shaughnessy asset management. This podcast is for informational purposes only and should not be relied upon as basis for investment decisions clients. Shaughnessy asset management may maintain positions in the securities discussed in this podcast. Today's episode represents a new chapter for invest like the best. So it requires a longer introduction normal starting today. I'll be bringing you two episodes per week on the same feat on Tuesdays. I'll focus on investors and on Thursdays. A host builders, founders, CEOS operators from all different fields. We call this new Thursday series founders, field guy. There's nothing more interesting to me than how great businesses get built and how investors can identify those businesses. At the right time. We've already recorded with founders, building companies, food, technology, infrastructure, shipping collectibles, and many more categories. The goal each week will be to have a builder share what they've done, how they've done it and what they've learned along the way we view this as a critical step in furthering our mission to capture and openly share the world's best knowledge on business and investing. Onto the kickoff episode with Rahul Vohra. Rahul is the founder and CEO of superhuman and extremely popular product for managing your email for who'll describes himself as a computer scientist Gamer entrepreneur and designer. You'll see quickly why it's the intersection of these areas that sets superhuman apart. We discuss why emotion matters when building products and how other entrepreneurs can learn from his experience. Please enjoy the very first episode of Founders Field Guide and stay tuned in future weeks as we host leaders from Nike Cisco Twitch, and so many more listening as we explore the worlds of cannabis baking that kind manufacturing, hardware software, and many other topics. Now, let's dive in. PROVO. Thank you so much for doing this with me today. There's a whole range of issues that I think we'll talk about for the first time with you giving your background and experience, and I thought a fun place to dive in would be with this idea of game design and emotion in software or digital products. Why are you interested in this concept and what have you learned building superhuman? Superhuman we build software like it's a game and that has been cold wind people fall in love with. The most software companies don't do this. No software companies worry about what he uses once a what they need. But if you think about it, nobody needs a game twigs installed on new requirements. So when you make a game, you don't worry about what uses once over a need you obsess of how they feel and when you're probably is a game, people don't just use it. They play it. They funded fun. They tell their friends they fall in love with it. So, this idea of game design turns out to be an altogether different kind of products developments, and it changes how people react today. Our business software feels like we have to check out email. We have to submit expense reports we have to answer this in crm. But what I like to ask is what if we could make software feel less like work and more like play and with game design we can. Talk a bit about the key elements of game design. What makes for a good game with something as mundane sounding as email? What are the major lessons you've learned as you've experimented at a tried to build that concept into the product? Well, I've being obsessed with this idea of game design really from my entire life as a kid I learned how to Code just like it makes games before I was founded as a game designer and as a founder I've gone deep into the principles of game design. And as it turns out, that is no unifying theory off game designed to create good Games, we need to draw upon the arts and sciences psychology. Mathematics storytelling interactions on to name just a few. Supemo we've identified five key factors to consider goals, emotions, toys, controls, and the solution concept of. And across these dense five when he principles of game design, so one principal would be make fun toys and then combine them into games and question I sometimes like to ask people is will what do you think all toys? The same as gains describe a toy in the digital software sense won't be an example of a toy. Actually differentiate toys and games, and then I'll give you an example of toy from human. and. It comes down to natural language at joy. We play with toys. We play games a bull as toy but bowl as a game, and it turns out the best games a built with toys. Why? Because then they have on those levels, the level of the toy and on the game itself when superhuman effort toy is the time to complete. which views to snooze emails? You. Type whatever you once it can be gibberish does its best to understand you for example, to d becomes two days. Three age becomes reality one. MO BECOMES ONE MONTH And the time also completed its fung because it indulges playful exploration and it's not long boardings before people stance doing things like whom I wonder what happens if I keep typing ten, just the number ten well, it turns out about Soto to the ten and ten pm will help out a sequence of twos will that's February the second twenty, twenty, two pm, and then you see people start trying more complex inputs like in a fortnight's and day, and it's not long before folks staunched winding pleasant surprises for example, to timezone happens without you having to think about you can type in eight am in Tokyo and it does the Matt tells you that's Eight PM Eastern time. And in most people really delighted to find out that you can type in things like I want to lose this email until Neta the email will literally never come back a Saito on listeners and so once your question, what is a toy in digital software form? Consider features of your own product. Do they. Indulge. Playful. Exploration. Fun even without ago. And do they create moments of pleasant surprise? Because if so then congratulations you have a toy and you're on the way to building a great in. And this is something that I find most companies don't do because like I said most companies instead obsessed with what do people once what do people need and these are perfectly good questions. Do we have thrown smock and Fitz is on that promotion school high again, you need all of these things. But as extra level, but you can get to when people find your software fund 'cause like I said, they don't just use it they employ it. Do you think the biggest opportunities for building companies like this is in the most mundane categories like I saw an example of course, you've been successful tonight here the superhuman for acts, but you see superhuman for calendars. For example, do you think that those kind of boring longstanding having changing longtime business? Are. The best ones to attack with this mindset I think so I do think the superhuman four x category is a little bit wider than just game design something that's taught by investing upon their nine look at very closely we look at things like is speed. Everything is cool value proposition. So if a superhuman. Is actually the number one feature in superhuman every interactions a slice in one hundred milliseconds less such as veal instantaneous, Allah customers save many hours a week reports getting to inbox licensed fastest before and many of them actually zero for the first time in years was really hard to pull that off both from a product inspected as well as design perspective as well as the engineering, perspective. To your point, the areas web as most headroom for this where the fruits hanging list. So to speak is indeed in those lindane categories, not because the solutions on achievable. But because of this thing that Paul Graham Kohl's Schlep blindness the idea that's it looks to your heart. I think we've had two generations of founders look GMO. Perhaps realize on some subconscious level that you can build something better. But then mind kind of steps in says not too hot. You can't go against. Will you come up against Microsoft's let's take something on that will be easier that will be faster and it does take. Time to take on some of these mundane areas because you often end up going against very entrenched products that are operated by incumbents in Gino Alana's one and a half billion US and for example, I'm five years into CPU I think a lot of people looking at superhuman go this thing kind of Cain nowhere of the last few years. But in reality I did have to grind along with all of my team three beforehand. And you're building for three years with no clients that right? Yes. Actually I was listening building would no customers for three years? It was so low founded for about nine months to one year. Then I've also boards the other two founders, engineer and about two years after that point six, three days after I started, we had those paying customer. One of my favorite debates in the world of technology entrepreneurship is the debate between sort of the lean model where you're iterating and failing allot and and learning through customer feedback and the what I'll call the key three boy movie production model where it's more sounds like what you've done, which is big long effort that is produced like a movie would be with actors script and everything else and you go to market with an incredible product not one that's been sort of iterative through a crowd describe your experience of the three years building. How do you get the confidence that you're doing a good job? There's no feedback from real using customers. Well, it was hard. And I remember it being very difficult journey. Forests, SOFA context in the summer of Twenty fifteen, we sponsored much like any software company by rising coat. And in the summer of two, thousand sixteen, we was still coding, and in the summer twenty seventeen, we would still coding and I felt this incredible intense precious launch both from the team and also from within myself after all my last company repulsive had launched scaled and being acquired by link in and less time, and here we will two years in and we still had not launched but deep down inside I knew a massive how intensely I felt that pressure of the launch would go very badly. I did not believe that we had products market fits although nuits I couldn't just say to the T.. These super ambitious intelligence engineers they pulled their hearts and souls into the products I figured I needed a plan, and so in the April twenty seventeen, I started my search for that holy grail for a way to define products. Market fits for metric to measure products market fits and for methodology to systematically increase products markets, and that's actually how I came across my. Market fits engine, which is how many people know of me. It's that now infamous colon first round review when in detail layouts this engine, this algorithm that we created and it's actually blends between the lean startup model and the east redeploy fat stops at model or the movie Production Model I'm actually a big believer in both I would say we sit somewhere in the middle I would say raise a tremendous capital up front I would say take your decisions as long term as you can I would say don't put on some minimum viable products puts out a maximally delightful products but I would also say listen very closely to uses listen very closest you'll. Customers an run the superhuman products market fits engine because it's really does systematically move you towards products market fits, but in a way that doesn't encourage you to fail. Fast I. Don't think anyone really wants to fail fast I think people want to succeed inevitably and that's really what oriented soup evens words. Of course, I have to ask the question now for the high level overview of that engine that product market fit engine lie you apply to you did and sort of how you came to the idea while I searched high such low and I read everything I could find I spoke with all the experts and the night came across this Guy Sean Ellis. Sure ran growth in the early days at dropbox locked in and events bribes even coins the term growth, hacker. Sean found a leading indicator of products muck fit while necessary benchmarked unproductive. Just ask you uses this. How would you feel if you could no longer use the product and measure the percent who answer? Very disappointed After benchmarking hundreds of Sausages Sean founded the company struggled to grow always get less than forty percent very disappointed. And the companies that road most easily almost always get more than forty percents very disappointed in other words if more than forty percents of your uses would be very disappointed without your products you have initial products lock, it fits our this metric turns out to be more objective than feeling. It's predicts success better net promoter score, and it smells only the best way to measure progress markets. Since we then used to develop our very own chronic smoke fits engine, and that's where it becomes sort of this really complex algorithm I'll do my best to summarize. Perhaps, we can include in the show notes a link to the process for our audience. First thing you do is you survey all uses and you ask them the show question how would you feel if you can? No longer you superhuman but also three more number two what type of people do you think would most benefit from the products? Number three what is the main benefits he received from the products and the full? How can we improve the products for you? Analyze the results to question number one. And you'll get. The set of people who had very disappointed somewhat disappointed in not appointed and it's typical for hasn't been through this process before. That the is in the region of half's fifteen to twenty five percents. The superhuman the actual number back in the day of summer of two thousand seventeen was twenty, two percents. Very clearly did not have products market fits I'm that may seem sad but at least could explain the situation to the team and most excitingly I had a plan to increase the school. If S- Tausif is in the sort of five to fifteen percent region, my vices you might want to consider pivoting is the products or the markets to try and find a higher scoring second. You send out the survey you get back the results and you never survey any usable than once you're emailing the survey outs and you then segments and at this point she wants understand who are the people who really love your products and I like to use the concepts of the high expectation customer, which is a concept I found from Julius mocking drops at BNB in many of the great companies and the. X. Is. The most distilling Cosentino. Demographic. Dale enjoy your products for its greatest benefits and help spread the word and the most important thing about them is that others want to be like them because they seem clever judicious and insightful. And this is best loan through examples. We can take book it soon as dropbox and also the Abbey. Now, the dropbox hse simply wants to simplify their life a trusted organized tech savvy. They WANNA get time back in the day, and at the end of the day, they just still has that back when it comes down like swoop the APP BE A. Difference. They're invested in being a good global citizen don't simply want to visit new places once the long they want to experience Paris as if they really live there an Ambien B.'s early success came from focusing on these influences and these speakers. So the big question is, how do you create your own EXC- well, go back to the survey results take Oli uses who would be very disappointed with Algebra products, and then just those uses analyzed their answers to question them to who do you think this is best for. This is a very powerful question as happy uses will almost always describe themselves using the words that knocked most them. And you can then turn these words into a rich and details description your own highest expectation customers. So now you know who loves your products. Then you go back to Olga surveys, you take each response and you assigned to each one episode. And his the magic pause. You take the uses who most of your products those who would be very disappointed without six and use them to narrow. The markets will do a simplified example of superhumans explain this. And superhuman the set of people who most loved the products with founders when managers were executives, business developments, and back at that time in twenty seven seen, we've scoring less well with sales customer success. Data signs with engineering. and. So his the trick you deliberately ignore. That sets you school less well with you deliberately ignore the personas who don't tends to appear in the set of very disappointed folks, and this is a trick cool to re segmentation. It's really asking the question the question that's asked anywhere near enough, which is what if we don't change the products will we changed the markets? And then just that re segregation, the two minutes of superhuman our product market fit school jumps by ten percent from twenty two percents to thirty two cents. Would not quite forty percent? Yes. We made significant progress in two minutes. The Algorithm continues and this this very nuanced way of how you insipid feedback who exactly do you listen to that? You can then use to further increase the products market school and using that week our product market fit school in twenty, two percent to a quarterly to fifty percents, of course, for he said, and then fifty six and then fifty. Eight percents just a few courses Lisa foresee became. This is why to bring it all the way back to the site of Lean Startup and the movie production thoughts of I'm a huge fan of being in the middle raise the money high of the team he really wants to build the product always dreamed of building, but also run the products market fits engine. So you can show your systematically moving towards products Lockett's. One of the key insights in the story I think is constantly ratcheting in your focus to the best customer, and even if that, it seems like you're shrinking your market and therefore your opportunity, you're actually increasing your odds of building something that people are rabbit out in this case are willing to pay for despite there being two enormous incumbent free options in g mail and well. Not Free but it's part of a package that people are used to using. I'd love to hear your thoughts on with that sort of in the books how you came to the price itself. I think one of the strange things about software as figuring out how to price it. It's quite hard because there's basically no cost of goods. There's often huge fixed cost to developing it, which would like to get into as well. But the marginal costs are very very low. So it seems like a strange thing to price software and at thirty dollars a month I'm curious just how you came to that number and what other numbers you might have considered. The most important thing. I say every founder I work with before you try and figure out pricing you must I figure around positioning and we started with this wonderful Oscar by Jackson. Also first round review, its high school is his edition. is vital his house neighborhoods. And Ariel advise using a formula like the follow foy target customer who has some kind of needs you'll product is in a category. It has some kind of benefits unlike the competitors your product has this primary differentiation. And she gives the example of Holly Davidson. The only motorcycle manufacturer that makes big loud motorcycles for much of wannabes mostly in the United States, who want to join a gang of cowboys in an era of decreasing personal freedom. Now. No matter what you think about cowboys the era reliving this notion of much one BS. You have to admit that pretty much nails a Harley Davidson position and I think a lot of that success comes really truly understanding. Now. We saw this really hard to see for him and so he went to put Ariel who by the way is awesome. We did for the reading is well, she turns out to be was the products marketing manager at garage team also the perfect for us. And she also recommended this book which would hardly recommends anyone listening to the show positioning the battle for your mind. We ask ourselves questions a we the Ford of email. At the answer is no. Are we the Mercedes of email not quite a we the tesla of email. Would guessing that. And all the way back in Twenty fifteen we came up with this physician. The founders, CEO's and managers of high growth technology companies who feel like wook is mostly email. Superhuman is the fastest email experience ever made. It's what g mail could be if it will day. So the twelve years ago unlike g now superhuman is meticulously crafted. So that's everything happens in hundred milliseconds or less, and we've since, of course, expanded beyond the story tightly defined targets, but it is so important to start talk find like you just said, and when you read this positioning, it's clear. Superhuman is a premium tool for premium markets i. want you understand that position and you can then be pricing. On one of the best books on this topic is monetize ing innovation I`Ma Them Ramana. Jim Mullen covers a lot of ways to develop pricing, and we used one of the easiest methods, which is the Fan West dope price, sensitivity meter, and so late two, thousand, fifteen, we asked about one hundred of earliest uses the following questions. What price would you consider? Super Humanity so expensive that you wouldn't consider buying it. What price would you consider to be priced so low you feel the quality wouldn't be very good and so you with know by it, I will press would you consider superhuman to be starting to get expensive? So that's it isn't out of the question you'd still have to sorta pilots and you still would. And what price would you consider? To, be a bargain in a great by for the moment now, most startups most technology companies in fact, orients around question number full because they tend to be selling into a market that doesn't exist. They tend to be creating a new market Renault uses. For this thing, a perfect example would be uber will back in the day rideshare earns exists. In a race to get all the uses, and so they were in this price for to be a bog integrate buddy but email us at like that. Everybody has an email accounts that everyone is using already either Jamal Will And so we deliberately incudes around the third question question that also supported our premium. Which is, when does it feel expensive but you'll still by anyway. And one, can imagine the Tesla did that with the Model S. and they've definitely done that with the roadster. And the median answer for the third question for us was thirty dollars per month, and that's how we picked price. The final thing you should do once you pick your price is to do a quick gut check on muck size assuming you'll venture back to you want to public company one day. For example, how can you grow? But one billion dollar valuation? Let's unit points evaluation is ten times run rate. So you're a hundred million dollars for us that would be three, hundred, thousand subscribers at thirty dollars per month, and that is conservatively assuming no other ways to increase average revenue per user, for example, new products going markets, and we asked ourselves do we think we can get to hundreds of thousands of subscribers for the products that we built we answered emphatically yes, and we went ahead with the price. So it goes positioning pricing market. Size check. I love that looking back on the journey so far what would you identify as the first big break in your favor in the history of the business? The first big break in my favor. Gush I feel lucky to have been the recipients of so many breaks. It's kind of hard to pick the first big one. I would say that's The most impactful thing. was having had the journey of repulsive. So for folks who don't know or they don't remember supportive was some time ago. It was the first GMO plugin to scale to millions of users and our vision that was to help you be brilliant with people. We showed you everything about your context rice inside your inbox. When people emailed, you show you what they looked like. They would a recent tweets profiles. Grew very rapidly in. So about two years later, we were acquired by and linked Tim. We ran all of our email integrations and repulsive kick started the whole ecosystem which email plug ins we sort of gave the blueprint to the community and thereafter you had things like Boomerang Mixed yesterday you name it they were will kind of using mechanism that repulsive had used to integrate with 'cause g mail doesn't really have or didn't time have an API an oxygen and that was my big break I think. Creating this company which was sort of a cult phenomenon being acquired by Lincoln it wanted a really long time. They only just shut it down this year much lasted ten years. Seeing, linked him grow join just after the IPO being that two years being around the smallest is people in technology at that time I reported to ahead of growth which as you can imagine. I learned tremendous amounts about variety and brandon would have mouse in house technology. He's actually grow. And having the credibility and the track record collectively this was all the biggest break. It was so big that when I came out to raise money for superhuman, it was like nothing I'd ever experienced. I raised the first million dollars offscreen of g mail where I just take a red muck and said I don't like these things. Why is this? Why is that? We're going to get rid of this get rid of that. I'M GONNA make blazingly fast, and by the way Alex was going to get through there in bookstores as fast. And with that, I called the first billion dollars essentially of nights. And compared to my experience, the first time founder which was nice. Day Difference. The line near that. So interesting to me is you're how? Companies actually grow I'd love to hear what you learned that linked in about growth. In my first one on one with Elliott's. I sat him down I said, you can imagine sort of young me from about. Twenty six at the time. Wide eyed bushy tailed in like Elliott's tell me everything that there is to know about balance. I WANNA make most viral products of the world and he said well calm down because there is no such thing as true. My Civil Elliot what do you mean? And he said, well, as you know, there is this notion of the lifetime viral facts at this is how many customers? How many uses one? USA. Creates over the course of their lifetime use or And he said you can never sustain that number being greater than one any period of time, and this is one of the biggest conceptions that people have about reality. Myself Leagues in was such a viral company and he said, yes but almost viral feature of the address book imports only has a lifetime viral, true zero point full and he said even facebook one. Of the most viral of time owning sustained a lifetime for factor zero point seven and that for about seven to nine months during the period of most must've will this is really weird. Then one of the benchmarks these numbers he said zero point suits is four is good. Zero Point four point seven. Great if you're doing zurve with seven-plus and that's phenomenal. Than the obvious questions when the I asked it is will how to companies go viral and he said, well, his Jesse secrets, it's never a feature it's never a viral mechanic. At. The end of the day is always word of mouth is always brand and the secrets of Lincoln success which like facebook success much like any mass market consumer Internet's brands is people talk about sits in realize it's because they've established a brand and that was my first one on one with Lincoln's worth. It honestly completely changed the way that I thought about software that thought about growth and I think superhuman is a wonderful example that we on Abrahams Company we think of ourselves that. We have the saying onery that what we make people feel is just as important as what we make will we actually make is joy and cell phone. And just a few minutes into the details on how we design for emotion. and. You can trace that all the way to that conversation that I had with Elliott's, and actually all the way back further professionally as game designer and I didn't know it's at the time I was acquiring the skills game design to create joy, and all I have to do was put together, put the skillset for creasing joy together with the I opening insights Elliott's to realize that one of the biggest things that we can do founders in is done ole too little Aaron Silicon Valley is to create brand companies to create companies that grow based on what of mouth is that is actually how the biggest countries grow Why do you think that happens? So word of mouth I've often told people about a great product for various different reasons. Are you targeting specific reason like are you even thinking deliberately about what you WanNa customer saying to another customer and then working backwards from that to build the brand I'm just curious what the deliberate strategies are to build a brand company and software. And this is hard and covert period. But the first thing to do is to go to lots of cocktail parties and listen to people talk about your program or wherever they happen to hang out fortunately for me might happen causes and I would kind of look in the compensation and just want over them. And it was always the same when people talk about superhuman. This sort of in that first year before we really knew what was going to be was always the same commentary people. Lean over the drink one another like. You really have to try this thing. It is so fast superhuman. The fastest email ever experienced fast speed fast short took about how it's driven or that as a native APP but the thing that our customers told about is speed. If I could boil it down to one would it's speed And that's how you should figure out. What's Your company around what is the one word that you'll customers constantly referred to your products with once I knew that it sort of gave me the breadcrumbs for start. It's into your customers started to sort of conceive, brandon my mind's sentence. The fastest email experience in the world is pumped since my had appoints and we took it from that the where would stance is, what is the one word customers products with? So, when you're looking at companies as an investor, there's the classic better faster cheaper way of thinking about businesses obviously superhuman is faster as an email client than anything else when you're looking at companies in which you may become an investor, how do you evaluate the potential for the sort of brand that could drive that word of Mouth Growth It's not actually necessary for I would say eighty percents, the companies that we invested since the companies don't really needs to. Push a huge brandon order to generates lodgements revenue many of them, for example, orange price this but there are some that. A good example would be house house is this incredible alcoholic beverage they figured out how to deliver alcohol to the home essentially being a low alcohol by volume chief as made from grapes anyone the industry will understand why will about supporting? This means that they can illegally delivered alcohol to your. Online and it's delicious to have many flavors. It's house H us, check it out if you're in the mood drinks. Now. This company clearly needs a massive Cosima incident ran the audit succeed. And we figured it out by going really deep with the founders. Do they intuitively understand press? Do They intrusively understand dimension? Do they intuitively understand paid acquisition and realize that physician solve problems that it will amplify all of the other things? Do they understand contents moncton? Do they understand business developments? Do they understand other channels that might be relevant dentists? Case does the founded understand all? Of the INS and outs around alcohol thing delivery in the US and the answer for us. All of these things was for the founder. Halina was ten ten bucks. She's just such a phenomenal familial founder that she understood all of these things to a level that told my actually very rarely see there's only a few founders snowplow affiliate who have that level of deep intuition brand building. What. When you look in enterprise software business sounds like a lot of your investments are in that category are the substitute kind of most important questions that you ask of yourself and the founders when making an evaluation. It kind of POPs up to a higher level, and this is our generic formula for all investments whether that consumable enterprise. I look for founded you have the following number one. They know how to make something people once and number two they know how to make people realize they wanted. Only has one of these things it's unfortunately will not be able to succeed. Unless on the skill side, the three of these. Secondly, I look for founders that demonstrates exceptionally high level of grits I think of grits as the combination of passion and perseverance passion means that the founder will not easily get distracted with new interests or goals and perseverance means the founder will follow through with hard things despite immense challenges. Found that the founders who have both assistant relentless move towards making this dotted successful faster and more effectively than anybody else, and thirdly I look for the possibility of a billion dollar outcome and this is actually our main reason to say, no, it's quite feasible to find people who happen to belong who them to, but they have a billion dollar thesis right now. I love this idea in the first part of the distribution side of things product is front and center. It should be a distribution is incredibly important. The way you phrase it is nice. Make people know that they want something talk to me a bit about how you think through distribution of superhuman obviously word of mouth is great and can drive awesome business outcomes but I don't think there are many examples of companies that grow purely on word of mouth even something like tiktok which has become. So viral and talked about a lot spent enormous amounts of money on marketing. Tell me a bit about superhuman distribution what you've learned about software distribution more generally. The would've mount thing is nuanced. I think that you should spend as much money as the markets will reasonably provide to you a marketing salons. You have what about the thing I would caution against is raising that money or taking out those loans than spending it without the underlying pulled from the markets because that's where I've Seen Folks Stumble now the super human growth story in the beginning, I always thought there would be three coal primary pillows. First of all is variety more generally would if mouth Is Pr and foods is on sense and we've had really great luck and success with all three of those things. So Festival on the veracity side, we've created an incredibly viral chronics especially benchmarks in our. Of Productivity or collaboration if you will. For single player productivity, we haven't had this level of veracity since critics like dropbox like slack. That was one of the things that I talk about when I did my series B.. Roadshow visiting will adventure films among other things folks dug in on was this product is actually really viral and at the time about fifty or sixty percent of our new customers were coming from direct referral in the products from existing. Customers. So that's the Stella. The second pillar is PR. I've always really enjoyed PR. I really enjoy talking to the press. I find it kind of fun the all these interesting stories to tell I'm a framework think of like talking about the frameworks as well, and so it was something that I felt I could totally naturally lean into and superhuman is also a very media generic products. Email is a perennial evergreen. It comes around every five to ten years. It's suddenly became again this year with the the rise of products like, Hey, from. Folks on. So it's one of these things where because email is something that all of us do a billion professionals, do it for three hours a day? It's in itself is very media Genyk in a way that perhaps some of enterprise software companies might not be and the third thing is content. We've done this not in an SEO driven fashion. We haven't sort of tried to create a high-velocity content production house. The way we do this is. A A theme and it's just one theme. This year is being game design last year it was product fits. I Rice about how we do superhuman but the way in which rice about it is to create a piece of evergreen consents that I, think will still be relevant five ten years out they become. Sort of de facto. How people do things the product market fit framework that I outlined Alia might vc friends. Tell me is is now actually the default way the founders of talking about whether have pro talk it fits and to me that's a sign of successful concepts. And it happens to you superhuman as an example, which is good for spreading weapons. ASIFA human a really the fundamental goal that is to let's create this piece of evergreen reference consents. That's just GonNa be a tremendous value this community over the next five ten years when you're doing the last fundraise what was the best question that a VC asked You I'll tell You what the most common question was and something where I was actually wrong and VC's were writes the most common question was because I had this slide at the end of my deck that had us doing all kinds of cool things last year this year next year and it was the year after but said, this is when we will integrate office three, sixty, five. And literally every single investor that I spoke to was like, will this seem ridiculous? Why wouldn't you just do that now and? Ten x the size of your markets overnight and I said, well, because it's not going to happen to a nice, it will take us about build let integration but even so I'd much rather continually make the products better than. Sort of. Engineering resource towards this activity that doesn't actually make the proximity better but it just makes it accessible to more people and every single VC asked that question looking back now I understand why they were asking the question which causes. Tremendous value to massively expanding on x you luck over a short period of time, and if you can do so you probably should especially if you can figure out how to do it without slowing down too much your product velocity, and so that's the strategy that with issuing right now is alleging the serious be money growing the engineering's. And we're going to build on office three, sixty, five working with mark cell phone this at the same time as continuing to build amazing features that argues love. One of the things that you guys do that I think you become very famous for and his again counterintuitive sorta like one of my favorite questions that Daniel asked his what's better than free meals free? You solve that problem we talked about that already. But additional thing that's interesting is that you think's still do manual on boarding customers. That's a very strange thing for a single user tool that think in general people could adopt an email client and beat familiar with it but you do onboard. Calls, which strikes me as expensive but also very interesting I'd love to hear your thinking on why did that and why you think it works for the business I've seen the loss of companies especially in our space which I would broadly define productivity collaboration get this very wrong I no longer believe in the traditional launch let's say you've built a new email clients or a new task or a new counter rap surface area for these products is absolutely massive. It's bigger than almost any other domain. What that means is you also get a massive surface area for bugs as well as massive variability and how uses one to use the product. Now, most companies would launch rap happen because the demand for these products is so high. It quickly get tens of thousands of uses, but guess what these uses will find thousands of bugs and that come would quickly get overwhelmed. They would not be able to fix the issues fast enough. and. So these users will become disappointed. The products, and then they'll tell everybody about their experience and that is the very definition of a net attractive. So in my experience, it's significantly best to do what we do, which is to onboard customers at a measured pace each week that way you have been with to find any issues that they had come across to fix them and to focus on making them exceptionally happy, and all of the says there are three circumstances where does make sense to consider a traditional look and that is when you need one of the three CS capital candidates and customers. If you need to one or more of these than maybe you should consider a MoD in order to be top of mind for a period of time. But in the absence of needing those things, I would definitely do it the way that we've done. What do you think the impact is term on the business model, which again software is business model is we've explored sort of Ad Nauseam over the last ten years is amazing because of the low marginal costs, how do you think about sort of the cost structure of a business like superhuman and how you establish a great business and a competitive business growing towards that billion dollar outcome or beyond this as you can imagine was also a conversation question that came up with basically every single investment that we spoke with. And I think everyone approached it with curiosity but also with a little bit of a bias, which is surely you can't do this. Surely you stain this for thirty dollars a month products I shouldn't spreadsheets on approved that we actually can. And the reason why we can is because. Of very efficient it's what Jason Lampkin would call click to close. So remember these on sales calls these customers who have been presold the come Envir-. Referral of our websites they preauthorized credit card. Then they scheduled for voting and we commend schedule. These very efficiently acts a typical week for putting specialists looks like between thirty, five, forty, five calls at capacity, and so when you do the math, the Fox five Cole's means that the sales efficiency if you will actually ends up looking a little bit like that of an account executives enterprise off a company and so you end up with very slim ligaments economics, and in fact superhuman, it's funds the cost onboard accustomed. When you take into consideration manages time where we will customer acquisition. So Michael that development rats or business development, rep and the actual Hof. Now on boarding itself, it comes out to about a hundred dollars humbling, and that is actually less than what many companies spend on Joe Requisition and sums of aid advertising. Will really done, and this is how I explained. All we've really done is take the money that you might otherwise spend on paid ads at instead spend on having a phenomenal first minutes with the product. That's a fascinating idea I. Love your frameworks way of thinking through things. What other major frameworks have we not yet talked about that? You've applied productively. I. Think the biggest long. meatiest one perhaps is this notion of flow in this goes back to the game design analogy, which is, how do you design full flow and it turns out? That's fortunately this has been something that has been heavily researched. into of what flow is in house create flow and I also find that most product designers don't really studied this. So I think we all have a basic understanding of what flow is an intuitive understanding. You might say your heads down or you're in the zone, those of us who play musical instruments. So who practices sports on find that we very easily into via those activities and it has been the subject of intense academic study and it turns out that flow has a very specific definition. Technically. A psychological state of mind has six components number one. It's the intense focused concentration on the presence number two. So absorbing that we don't think about the future and we don't worry about the past number three is demanding that we don't care what others think about. The before too so easy that we always know what to next number five it is so powerful. It's also our suggestive experience of time time high the flash by an instant or French outfit Abba and the six it is so rewarding that the activists he becomes intrinsically most of these inc.. And some folks will know that those intrinsic motivation to extrinsic motivation and intrinsic motivation significantly more powerful. An external woods. So when you get into flow, you have this intense concentration. You don't really pay attention to your surroundings even your experience of time it is sort of blending walking and you'll intrinsically enjoying doing so much that you actually end up doing you'll life's best on your end slow. How do we help people get. Well, it turns out that there are five preconditions and it's the less. Most product builders don't understand. Let's for. Number One we must always knew what to do. Next number two. We must always know how to do it. It's number three. We must be free from distractions than before we must get clear and immediate feedback and number five, and this is the weirdest one. We must feel a balance between challenge and skill and it's actually most of. We must feel a balanced between the challenge and perceived skill. If we could see the activity that we're doing to be to hod the emotion, we actually feels anxiety. If we perceive activity would doing to be too easy. We risk feeling bored or even apathetic. And as counter intuitive as this may sound, this often means making your products more challenging to us, and we deliberately do this superhuman superhuman massively increases the email skill level for everybody. What if your email wasn't that challenging in the first place a what if you will already highly skilled when you came to us if we don't do anything else the experienced will be too easy and you would get bored imagine a video game that was just trivial. All the way through will then know this sounds crazy. We increase the challenge level. and. So we provide a challenging goal hits inbox zero, but do it without ever touching your mouth do it with only the keyboard and the keyboard shortcuts in superhuman commanded all the other amazing things that we've built to enable you to do this. But YOU'RE GONNA, learn a new skill and in doing so you'll unlock and you level of mastery and you'll hit inbox or more than ever four and you'll save our This now bounces perceived challenge with Steve Skill and help skits all of our uses into a state of flight. I love that cool and somewhat counter intuitive thing to build into product make it harder or more challenging the really neat you at the very beginning talked a bit about the sort of beautiful imagery that comes when you hit one of the main goals and superhuman, which is inbox zero talked me a bit about. Nine philosophy. It seems like something that pervades the product may be purveyed some of your thinking as well. What is design mean to you in a product? There are quite a few different things that are possible what we call our joy formula for products designed for Engineer Unser just with the Lens of products is on. Number one is ten x execution. And this is actually one apple that explain it I by analogy. Apple. Was Not the first company. To. Come up with face. Apple was the first company come touch ID. I believe in both cases especially Samsung that had enough flagship phones. Yet they were the first company to execute its to a ten x level to make that experience feel joyfully exquisite. You could argue that Tesla does the same thing with electric couples with the first one, but I do it's at the level where they do it. And we do that with proximity. We do that with the you know super human is not the first company to let you set a reminder or to snooze and email, but the way that we do it. Is At at level it is at ten x level we all the first companies let you do it without ever touching amounts. We all the first company to let you do. It's whilst indulging playful exploration. Went through. Elliott, we all the fuss companies do it talking in just a few characters of what you mean like two D, and we smashed new that means two days. We've even type in things like Hugh full will in Fort Nights will Friday at noon and we know that means we all the companies do it when you can type in times I want to get this back at ten am in Tokyo telling I want this to arrive in my customers inbox at nine am eastern time and it's not level of execution is taking any given feature ten times farther than anyone else would take. That is the first pillar of our products in design playbook. Second people as fast. Now, when pulled behind, it was the employees at Google. Who Created Jean sat down to bill g mail he had this will it was the hundred milliseconds the idea that every interaction should take place in one hundred milliseconds or less why? Because that's when things begin to feel instantaneous. Now, long story short she mellows unfortunately no longer like that many actions take second Milton's second such as many seconds. So we've taken this rule and pushed it to the next level. We've created a fifty millisecond rule. We want to be twice as fast as the original g experience foods, keyboard mouse. We have this philosophy that for most things, it's not everything but for most things that he bought is faster than the mouse and you will know any number of financial analysts for people who look and spreadsheets all day or people who work in the military who. Can Intelligence the first thing that you do office that happens to you when you join intelligence coal or when you join any kind of financial institution is they rip out the mess and the like you GonNa Learn how to drive this dash boarding school or excel or the database tool will this cruel with only the keyboard and the reason is when you have billions of dollars at stake, people's lives at stake speed truly messes. Why have the philosophy that speed truly masses for everybody for us the most precious thing that we have is our time and so it's Allen. Missions Teach People House operates Another would be full screen is focused. As opposed to trying to multitask by default in jail when you see and you get that little tiny composed window, you multitasking by default and so when a new email comes in you more than likely to be distracted away from the emails that you're actually trying to rights and superhuman. When you hit see when imposing, it's a full screen experience as possible for a new email to strategy. We believe in Minimal. Yet, surprisingly powerful, a number of buttons has been on the superhuman screen when you're looking at an email has been three and it has been three for the last five years. How many products can make a claim I think probably non and the reason why we can is we have this paradigm called Superhuman commands basically you hit command K.. Pulse up this beautiful. Commend minds face sort of styles to evoke retro melons faces like Dos where you just type in a few wants essentially super easy to use. You don't have to amend the Komo mice, insects or anything used in a few characters of of the idea that you have, and it will automatically do it for. This allows us to put no buttons on the screen onto prevent feature creep from ruining or product, which does actually happen to most products time we believe in exquisitely crafted details. So for example, there is this notion in poker free of baseline rhythm. When you take your page, let's say you'll setting a magazine you would lay out halves every four millimeter. Align across the page and you would once the baseline of your text whether it's big will small heading will bought into lines of this. You want your graphical images This you'll want you'll flourish as to aligns list, and this is part of the secrets of making a magazine feel like a magazine it's how things feel premium in high at historically, this has been nearly impossible to do on web design because foot metrics hog because every browser renaissance differently because very few people in how fog metrics work because you have graphical elements because she has a nightmare. Conrado CTO neither did in the early days of superhuman is reverse engineer, the chrome funt engine and built own layout framework ncis to automatically snap any piece of text and not to the fundamental decides any graphical elements to a full pixel grid, which is possible gives superhuman. It's. A Beautiful magazine Land Field, which also supports the premium positioning that we talked about earlier. So that's a section of our product and design framework our playbook. Insists that this is written up every single product Spec that we do just so that as we scale the company I'm less involved in the details was still carrying full woods this torch of what we believe in. If I were to go pull all the people that have worked closely with you at superhuman or even before linked in and prior to that, and maybe all the investors that no, you well and ask them all what your personal superpowers were. What do you think the most common answers would be I think the most Cohen, answers would be. A few different things. So I've had a few close friends who have been founders. Tell me, and this is my currency co-founders telling me. that. One of the reasons they were most excited a working with me and why they said Yes to with me is that I have exhibited. Shockingly high levels apparently of empathy. especially for customers. Than they have ever come across and so previous CEO's previous people that they worked with were able to dial up the empathy for customers to the bill is that I do. But apparently again, this is just told me the interesting nuance is I can dial it down in an instance. The definitely occasions when you need to be able to dial it down because the folks have shopping behind empathy will know it's crippling and actually this is something that I've spent a Lotta time exploring with my therapist. So huge believer in therapy and executive coaching with one of each and a Phoenix flooring this idea of empathy with my therapist quite some time. And she started breaking down for me explain that there are two types of empathy this type of empathy where you can't help but feel what the person is feeling. That's actually closed sympathy in kind of empathy waste would've intellectually understands you don't necessarily feel thing. Now, I. Actually Exhibit Sympathy More often than empathy and so when our uses get upset when our users feel joy, I'm literally feeling it with and sometimes this a little bit crippling and so I've had to learn over the years to sort of dial that down in order to become a more effective but rely on the sympathy aspects to create good products. So I think that's what my co founders say I think what my investors would stay is simply the ability to be incredibly compelling. I was asking David illustrates my vote along with Marc Andreessen from recent Horowitz about advice on closing executives because we've just raised a series. I haven't had much experience causing executives in the past repulsive souls before the stage of company. So I was saying, well, how do you do this? He said just be yourself. You'll. So naturally compelling it's like you kind of had a little bit of the Steve Jobs reality distortion field. So just go and be yourself. So I think that's what armistice would say. You mentioned therapy there really curious both with that, and I guess coaching to as a second version why you find that useful it's something that I don't know anything about not done either really seen people say that it's really effective and really just be most curious what you get out of it why you find it valuable. I think it's because on the frameworks. And I think that. There is just something about my mind that works. When I'm asked a question. And this has historically been the purpose of muses in all of history anyone who was sort of looking at the forefront of creativity or financially technology mathematics and science. They tended to have uses people who they will just go to and say, well, I've been thinking about this told through this. His Mike Quesion so far will his mind I don't like this line what you think about this line and I'm obviously not doing that from my poetry my. I'm doing that how I feel and why feel that way when my therapist? And what I find is often she has the answers his she's a very acclaimed qualified therapist who has many clients many of we also have similar lines what I lead. But. Also, she's just saying the why'd you feel that way on what you think and? Simply. Asking the question is enough to kick the framework onto my mind into gear. And then I'm often shocked to what I'm able to say over the next few minutes in elephants have questions by saying well. One point three point three point four and then I immediately stopped writing down because I had no idea that framework was looking in the back of my mind, but it was an all it took was a question to get it out and then going forwards no longer have to go through the agony of not understanding why it feel the way I. Feel I now have a new framework in my toolkit. I love that you inadvertently just made me realize something about myself, which is that maybe the reason I haven't done it is because I'm the one doing it meeting almost all I do is ask questions and I always am befuddled why anyone cares about that but you help me understand now why might be valuable to ask a lot of questions we uses I love that I love that before we go to a couple of closing questions, we didn't spend a whole lot of time talking. About your activities as an investor I knew you're active here have invested in a lot of early stage companies. I would love to hear a bit about both your motivation for doing. So I get asked the question a lot about why do so many different things and I'm sure you get that question too and so I love your answer to that why you're interested in doing it and then any kind of big thoughts on what's most interesting in the technology landscape today from an investing standpoint. Festival was wide odorless. So for me, the motivation's on multiple, one of the most interesting is. It genuinely makes me a founder. Exciting to invest in a disparate variety of founders of doctors is early stages precede seed with help those on. This is actually mostly giving back. It's by sharing the frameworks more that I've shared with. You is jumping in the trenches by helping with crazy things that might be happening at the time. We had phillies company where one of the VC's literal bail the company instead, we no longer want to be invested, and so todd deny helps find another one invested by their shares as you can imagine that. Trajectory. About founder and for that company. So sort of getting involved at the early stages like that, helping design their on boarding programs product market FIT Games. Holding. I also do latest invested. We typically do this espy's to date, and these are companies that many times actually late stage in superhuman. So for example, I just invested in Kota in this series. Just invested in class at these companies that offer the down the road and I looked tissue Shia has a mental and as guru of sorts I looked to Sam similarly such incredible founders and I find it inspiring motivating and it drives me after a re to the local the doing I'm immediately filled with ideas superhuman in might go back out Stephen I'm like guys. We're going to try this. We're GonNa do this angle a really think we should give this channel ago Ohio, this type of person I genuinely find it makes me a better founder. What has you most excited in the technology landscape I think it's so cool to see things unfolding from the ground floor on any major trends that are notable to you that you would point out to the audience as interesting. So we tend to invest across quite a broad variety of sectors, the following trends and trends the were really excited about festival is the trend that recall viral Sasso. This is software his products that can inherently go viral. They have the potential white Elliot said way back when to become a massive consumer Internet brand superhuman I think is an example of this and we love investing in companies like that. Another is productivity and collaboration you have things like. Sigma at able notion wool, grace examples of this trend I. think we're really in the early stages of that. So there'll be more to see that as well. Are you have things like create the tools tools that help a next generation of creates building credible things I think that Andrew Mason's company de Scripts, which is one of the most magical pieces of software at the scene when it comes to Chris in podcasts is a phenomenal example of that. You also have things like business infrastructure, some of our most successful investments as individual investors. I'm talking about investments from four or five years ago, where were now forty or fifty x have seen business infrastructure investments, companies like club. It's easy post where API companies, often they get integrated that become part of the operating system of the company, and so that's always impossible to rip out either really excising investments for as well, and then we also love DC Brunswick mentioned house, which is the low. Alcohol by volume para safe. There's also minds that we invested in, which is building the wills first productivity drink. It's a short of delicious honey slightly much a favorite drink alongside your morning coffee and as someone who has tried a variety of new tropics this is by far the best phone it doesn't require cycling it's healthy it's safe and Jing's Shara who was previously a very successful founder has that same set of attributes that Helena has just fundamentally understands how do you build a large? Internet brand and how see books. So those are the areas that we really about. As you think about superhuman and I look thinking about companies, different acts like an act structure like a play act one maybe is the time spent prelaunch building. This kind of your vision of what a better version of g mail might be maybe to is the original success in fit with the market and and refining that and expanding into office. Be Curious how you would describe what you think act three will be for superhuman. I'd say was still in Act Two? I'm not quite done with the the single player productivity aspects of superhuman is still plenty that we wanNA builds. I mentioned on a few key metrics. I is how fast people say that going and today saving people assets before the other is the incidents of inbox zero how much people can hits that so for? Example when now at the point, we actually just did this analysis with thirty six percents of people hits inbox zero in the on boarding itself and more than half of all of our customers hits inbox zero within four hours are starting to use the college. I think these numbers are great. I WANNA keep on pushing them a lot of amazing things that we. have in mind a contrived those numbers act three of the company in bowls a few different things and I can talk about to. So number one I'm really bullish on rising assistance. So imagine waking up one day, and this is the most extreme Bush in office but imagine waking up on day and perhaps all of your emails are written for you so instead. Of facing a hundred dollars that you have to get through a role, actually pre-draft it and all you have to do is come in and slugging tweak a few words here and the which than trains the system. So it gets besser rushing for you the next day, and then you hit send and it may sound like fiction but I think we'll one Vega I think another thing I'm really interested in is this intersection between products of and collaboration, and this was a very sort of counter intuitive decision that we took when most of Silicon Valley was going after collaboration than multiplayer tools in team oriented features. His us we sort of widely said, no, we're going to build the single player thing that makes individual people incredible during their individual email and the reason that I did that was I believe in building software that people wanted to use for themselves and choose for themselves not because that teammates a forcing them to use. It's not because amount just said, hey, with standardizing on juror over get hub or whatever happens to. Really wants to build a tool that people genuinely wanted to us and we've done that and we've got a little bit more to do that on the productivity side but I think what you'll see is over time we start to move towards collaboration. How do people in the together is signing in delegating tasks sharing of is Collaborating on drafting emails together I. Think a lot of really interesting stuff to be done in that field as well. Rule. My closing question for everybody is to ask for the kindest thing that anyone's ever done for you. I've always actually struggled with health of my back. This is being switched lifting police from songs time definitely from sitting down for Fosse, much of the day, and that was this occasion where it was shortly after a New Year's where I'd manage spray my back. And in a really really bad way. I. Mean I was literally was paralyzed on the floor and I couldn't really move my legs I still sort of had a buddy controls I call myself to my bed. So and my youngest cousin sister was staying with me at the time, but she had to catch a plane and jet planes All the way across America somewhere else and instead what she chose to do was canceled And, stay with me and give me Rep south in cool nine one one and get the ambulance people to my room which was audio by itself because it was at the top of the building and. Stay with me all the way through the entire will deal from. Being injected with these intense painkillers like actually bend me at the back end. So they put me in this field trout suing the ambulance through to the emergency room, and then I was actually hostile for the next week'll. So because I'd really sort of pushed, my buddy rights very limits I had to learn how woken so have to go through some degree of physical therapy and it was sort of lifestyle time and fifteen steps tying them essentially try going up and down a staircase and she was present quite a lot of this Jillian it was a true acts of kindness. So I, I would say it's not. Fantastic. Well. So enjoyed this, like I said, many times the conversation I just love people that have applied frameworks, not just theoretical but actual hands on application of helpful frameworks for building great businesses. You've shared a ton of those with us today. Thank you so much for your thinking and for. Thank you for having me. This episode was brought to you by Microsoft for startups Microsoft for startups is a global program dedicated to helping enterprise ready BB startups successfully scaled their companies in our five part mini series we were talking to Evan Riser. CEO Abnormal security. About his experience with Microsoft for startups. In this week's episode with Evan we discussed the founding story of abnormal security, what it is what they do and how they got started. So Evan I thought a great place to start would be just have you describe what? Abnormal security does admiral security is a next generation. Email security platform is to protect enterprises against targets social engineering attacks like supply chain, compromise fraud, or busy compromise, which is the number one cybercrime in the world right now. So obviously, a ton more just of the world has moved digital has moved to the cloud security. Digital security has become ever more important. I'm always interested in how companies like this get formed like what the origin story was were. The founding insight was he described the very earliest days and what led you decided to start this business. So twenty team we started there's probably trillion dollars a year spent on. E. ON premise and you have to imagine the ten years Schnauzer it percents in the cloud is. Six hundred billion dollars a year of spend that kind of moves like these new APP news club was applications that was like the first one to enterprise cloud. That the second one is just the symmetric impact that is across industries usually a big gap between the promise of Ai -burse. The impact that you know security and it executives are seeing in their companies. If you contrast a level sophistication of AI at Google verse the thousand hundred clearly either big Delta there. So I felt like as more and more it insecurities is moving to the cloud. There's a big opportunity for like a true company take advantage that that trend and then the third thing which is I think a good reason for any company to start is just customer demands we talked to probably fifty or. One thousand CEO's before we started they said that email security generally and specifically busy compromise with their number one worry, and the fact that was the number one cybercrime was evidence. There's some sort of missing solution markets. Then finally, maybe like the shift of enterprise into Microsoft, three five is a platform enabled. All the API's that ecosystem nibbled a platform that could support these new technologies that take Evangi help enterprise it security teams, can you maybe put some extra meet around the actual vulnerability here that you're helping companies protect against the mentioned that demand say a bit more about that demand how specifically what were their security? Issues that your product solves for these companies. So email security very broad. There's thousands of our flavors and probably all of us have seen a couple of examples of that for the most part, there's great solutions in the market today for spam and phishing and malware. The trend we've seen in email security is the shift from these bulk attacks, his very personalized targeted attacks, and so the canonical example of a busy mall compromise attack will be someone impersonating a CFO or CEO company use numbers identity to trick someone said the organization paying invoice by leveraging that at social relationship where the implicit trust then using that basically. You know steal money from the company said sky the most basic example and they get much more complicated. Suspect me how very sophisticated supply chain compromise where attackers are breaking into trusted suppliers, vendors, customers, business partners, and using the real email accounts of those people which may not be secure themselves. That's terrifying moment switching I hadn't asked but I'm glad that I did what is the specific way in which you solve or address that problem? How does the product actually work? It's a cloudy the solution instead of your customer, you wanted to play a product you would basically go into your Microsoft have imported. COULD ONE CLICK Install the pocket authorize us to act as always different API's that power the product we analyze data. We basically build these behavioral models that understand how to businesses work people communicate with where's your supply chain look like, and then every time we see a new e mail new mega teams message new log in will analyze that against this behavioral model, but we think normal behavior looks like and what we detect the or I looks out. We'll go flag that as a attack, and so I understand nor behavioral business we can detect these sophisticated social engineering attacks, typically bypass business process and lead to that thinks companies I'm curious how you thought about the early team I could see it seems like one of those products that you would have to spend quite a bit of time assembling before you went to market with it. So did you think about that early team in what was important for? I think when it comes to building team media strategy in general I actually important to note was it take to win where are unique strengths in the of gaps so for for me personally I'm a good recruiter and a good culture builder around five like pretty bad every other job function, and so I knew that the purpose company was to go create a no a multibillion dollar enterprise company to go help our customers and so when when it came to the team, I, just try to surround myself with the the best people possible and so I went to the person I thought was the number One enterprise investor who who's a multiple IPO's knew that the best the world machine learning and AI came from ad tech companies, and so higher machine learning leads from Google pinterest twitter and a bunch of other companies rights make add silicon, Valley's best machine learning team I hired the Sierra ran cells number one email security solutions today a hired the head of product who built solution generally my strategy, and you'll find that the best people in the world they stand the customer needs it can build your innovative solutions that haven't seen before. So so basically built the the avengers of learning from from from other places. That was the goal you have an unusual funding story which you basically never hear almost all of the successful companies that you hear that they turned down a hundred times by hundred ABC's I. Think you had a very different experience working with Ray. Lockheed describe why you think it went. So differently for you generally most venture capitalists writing grill like Bobby particular, they want to take advantage of these. The secular platform shifts they want best of world-class seems to want the big marquee companies that can transform industries, and so I think there's companies that gave them confidence. Generally security's a big market they saw in customers who cared about this problem and then I think the. One thing. That's one question who like well, why now like why company two years ago, and I think that the big trend is just people moving into the cloud office environments. In particular, you're the Microsoft platform and just me as email security stack the whole ops environment it creates this new way of accessing data all through API's and so because of that, there's like the first time ever that a customer can deploy. This type of solution is single click than a meal value lambda weights, and because its API's give you your immediate access and cow retrospective access the having to deploy a box like your data center without having to like change around your mail routing. Based a new way of delivering this Proxima markets and I think that fundamental shift in how enterprise cloud offices that basically create opportunity for us to build a I powered massacred products that also had better margins, faster sales, cycles, and privacy. Poorly, it's more effective product for customers. To find more episodes, sign up for our weekly summary visit investor field guide dot com. Thanks for listening to founders. Field Guy. Pound.

founder Microsoft United States founder and CEO Patrick o'shaughnessy Vantaa Jeff Ma CEO Nike Elliott brandon Rahul Vohra DOT Venta PROVO Shaughnessy Lincoln Sean Ellis
Nextdoor SPAC breakdown, Pelosi trading options + Morning Brews Alex Lieberman | E1242

This Week in Startups

1:17:16 hr | 3 weeks ago

Nextdoor SPAC breakdown, Pelosi trading options + Morning Brews Alex Lieberman | E1242

"Okay today we have a great interview with morning. Bruce alex lieberman we breakdown. How they went from a few hundred subscribers zero dollars in revenue back in twenty fifteen to then selling the majority of the company to insider for seventy five million just five years later. Just great entrepreneur. Who's now in angel investing. So we talk about that whole bunch and before we do that. We have two quick news topics for you next is going public vias back in fact khosla spac so this is very interesting to see a venture firms back actually take out another venture capital firms big bet namely benchmarks next door and nancy pelosi. Isiolo it with calls now and seems to have made a bunch of money buying amazon. Okay sick with us this week. In startups is brought to you by odu is a fully customizable and fully integrated suite of business apps. That lets you build and scale your stack as you build and scale your business. Your first app is free forever right now. Odu is offering one hundred dollars off your first implementation pack at odu dot com slash twist. That's oh dio dot com slash twist user testing real time video feedback real fast from wherever you work user testing real human insights try user testing free today at user testing dot com slash twist and vanda compliance. Insecurity shouldn't be a dealbreaker for startups to win. New business. vantaa makes it easy for companies to get a sock to report fast. Twist listeners can get one thousand dollars off for a limited time advanta dot com slash twist. Okay next door. Which is a neighborhood network is going public bias back with coastal ventures to ticker symbol cave. Esp for now what's to mergers complete the next door publicly traded entity will trade under the ticker kind k. I n d not kind bars but kind Which i guess is the last n d is next door and the k- might be for khosla war. Be kind to thy neighbor one of those but before we get into fact. Here's a hilarious Cliff from what. I interviewed the Former ceo nazarov tola at launch festival. Back in twenty eighteen. I'm such a huge fan of next door. Have been part of three communities. And i thought i would just start with the absolute proof that you have created a incredible phenomenon. This is when you know your company has made it is when a parody account is made and it goes viral. Anybody here follow best of next door. Raise your hand if you follow this. So it's only like ten fifteen people you're gonna love. This is the best way to handle. Ever thank you. Jason forgetting even more people to follow this account that it's we don't prefer they follow really. Are you crazy. This is like when you get parodied for like the edge behaviors in an ecosystem. It just means you are the greatest success ever but the the point of this account is that people get maniacally passionate and sometimes weird about their local communities are calms. You'll hate best of next door. I think i will admit even though i don't like the fact that there are more followers of best of next door than there are at next door itself. I do find it humorous. You are a complete liar. You created this yourself you have a burner phone in your pocket right now okay. Let's be honest. I have three fake parody. Accounts for jason and none of them have gained any traction. I keep trying every two or three years at greater party account and the same thing happens. I can't parody myself. Because i'm such a parody. Funny moments there for my interview. I stay by vague. It's one of the funniest accounts ever and yeah the verge even picked up neurosis answer in an article headlined outgoing next door. Ceo of not abused by at best of next door are calms people. Eight at best of next door as it aside. Roberts replace the ceo. By sarah frier in late twenty eighteen she was previously the cfo at square for almost seven years. And if you go back to the best of next door twitter account they're pin tweet is told that argo from way back in twenty eighteen. So here are some of the recent tweets from that account. Next door is twitter for old people burgers at an understand. They make vegan meet. It seems like a scam to me. I have to cancel my costco membership. Literally a post next with a picture of burger potties made from plants Perplexing folks and then best of next door great great dunk here was dollar. Signed karen not available as their ticker symbol hilarious and then another great one. If you're on our youtube channel you'll see these videos will cut the men of. You're listening to audio all describe before you. The man in the picture is six eight for a size reference. I don't have exact measurements twenty dollars for the rug. Pickup choctaw anyway. The guy lays down the florida. The rug is if you're going to roll a body in it and throw it into a ditch. Something very weird anyway. Back to back by the way. If you don't know what next door is essentially imagine a google group for every zip code you invite your neighbors and then you can get into next door and complain about each other complain about somebody driving too fast. Sell your old tennis rackets yada yada but is actually quite nice when at its best it's great for coordinating and getting to know your neighbors at its worst people. Like oh my god. There's somebody who looks different than us walking around the neighborhood and you get some karen taking a picture of somebody who they doesn't belong in the neighborhood and all kinds of yeah unfortunate kind of post because people are confused because they think that they're in a semi private environment when using next door. Because you have to have a postcard sent to your house with a little code on it in order to get into your neighborhood and that can make it appear to people that they're not going to be screen shotted and those will be sent to another location which is semi true but of course people find out ways to sneak in or people rat out other people for saying inappropriate things inside of their next door. So that's how it works. That's why it's powerful And that's why advertisers like if you want to advertise your real estate services to people in palo alto or atherton. You can imagine what the rates would be for advertising to a community with an average home that of price of five million dollars so they're going gonna generate six hundred eighty six million dollars in proceeds By doing this back that's gonna volume at four point. Three billion a fraction of say you know the value of the trillion dollar facebook empire but You know a portion of the value of say a twitter or maybe a snapchat so they're on their way georgia. Seventy million of those funds will come from a pipe if you don't know what that is. It's a private investment in public entity so when institutions or accredited investors buy stock directly from a public company below the market price. This allows the company to raise money quickly the pipe investors include t. Rowe price dragging your tiger global to mothers major prese back investors of course benchmark and bill gurley kleiner perkins john doerr bond capital. Mary meeker and you know it's a pretty amazing group of folks. The spac is notable because it's khosla ventures and because they were not listed as prior investors in next. Or maybe they were but it doesn't seem like it venture firms like khosla or lear. Hippo are now popping up their own specs most people said oh they're gonna use it for their own portfolio companies. Now it turns out you know. We're starting to see them do other people's portfolio companies. And this makes sense because we're always trying to make mistakes when you're in the venture space or you've got to cede fund you miss an investment but you know you're close on. It's a tried to get in the late around so it might be that you know. Coach last saw benchmark kleiner bonded gray. Lock getting on next door and they always just had that regret so now they get to take the company public and make some money off of a company. They learned about at four point. three billion. That'll be double their laughs. Private market valuation which was two point one billion in their twenty nine hundred series h win which they raised one hundred seventy million twenty twenty revenue one hundred twenty three million twenty twenty one expected revenue. One hundred seventy million. That would be a forty four percent increase. That's a nice growth. it's not like early. Stage growth where people are doubling or tripling as number gets bigger the percentage slows. Down one hundred and seventy eight million. In twenty twenty one revenue would put next door at twenty four times their price to sows in other words. Twenty four times. The number one hundred seventy eight puts them at before point three billion dollar valuation or if you divide the four point three billion dollar valuation by twenty four you come up with the number one hundred and twenty seventy eight or so. So that's i think probably aggressive. But not overly aggressive in terms evaluation. They have sixty million verified users. And remember you have to sign up with an actual piece of mail to your address to verify so their users are very very very valuable they have twenty seven million weekly active users up but there are a little generous in their weekly active users calculation. They claim that over fifty percent of users remain monthly active users after two years on the platform. So that's pretty good retention. But i think again little generous here on how they count the daily active users the mouse from the investor presentation. They count dow's as unique members. Who have started obsession or open a content email. Some people would give them credit for opening an email. Why not other people would say. It's a little sketchy to count those emails. Because they're not really logging into the service maybe they're just casually looking at it but it counts as an impression i would need to see. The percentage of people they're counting is daily. Active users or weekly active users and what percentage of them were opening email in other words if it was fifty percent of their active users are engaged by email. That's a little sketchy to make that the number so that's a red flag bear. So you know if you're if you're reading an email newsletter i get it that's the totality of the product. But if i get an email from twitter like hey here's what you missed or again email from oetzi you know. Hey here are some things that you might be interested in. But i don't visit the site to sat really count as using the site You know you're saying user you mean using it's kinda like me seeing in in a way like a banner ad or a billboard for google. That was an actually me using google to see them be a little more upfront about that. How does this compare to other social Companies while snapchat too finds their daily active users as a registered snapchat user who opens the app at least once during a twenty four hour period. So that's pretty clean right. Twitter is the most upfront. They only count monetize. Dow's twitter users logged in or were otherwise authenticated access twitter on a given day through twitter dot com or twitter applications. That are able to show ads. So they are. Twitter is trying to be super intellectually. Honest snapchat feels pretty honest and then facebook. Their dow's are a registered facebook user who logged in and visited facebook through our website or a mobile device or took an action to share content or activity with his or her facebook. You just say they are facebook friends or connections via third party website that is integrated with facebook on a given day in other words if i was in if i was linked at and i shared a post to facebook. That's a behavior that i didn't go to facebook but i did take the action of posting in creating content or facebook. That seems fair to me. Actually at next door obviously super generous with themselves with the dow counts daily. Active user. Weekly active user monthly active user. If you've never heard of those so after two years greater than fifty percent of the audience remains engaged is their product product market fit slide in their investor deck. And i buy that. I think that's pretty good. If people sign up that they're coming back two years later it makes total sense and according to the investor deck next is daily active users in average revenue per daily active user of both much lower than snapchat and twitter's i think next door has have a has had a hard time figuring out how to monetize the platform because they're up against facebook and google and other large ad networks however the company pitches this as a positive calling it significant monetization potential in other words our revenue per users low. We have room to grow snapchat. Eighteen dollar annual revenue per user. Twitter is at fifty nine dollars per annual revenue per daily active user. Next door has twelve million daily active users and they count ten dollars in annual revenue per dow. This could be because they're just not good at selling ads that they haven't built an app platform twitter notoriously bad at ads and they really didn't have a great product so it takes time but verify daily audience with significant monitors motorization. Potential is how they frame this in their slide and short by by to a certain extent tech crunches. Alex william a friend of the pod. Summarize their pitch to investors as such. The company is saying that it's service is unique and its users. Sticky as product gets better with more usage that it has several ways to make money from each user that some of these methods are obvious and could be easy to attack in that it has not reached its full potential revenue from international markets. So it generates fifty million business recommendations from neighbors. It's nice sure yup does much more and next monetize is by selling advertising for small businesses who promote their services and products in users feed. Local businesses are notoriously hard. There's so many of them. They smell spend small dollar amounts. So this is i think. Next door's challenge what they're best at getting you. Local advertisers local. Advertising is a tough business. It's a grinded out business. You know even from the days of the yellow pages to now being. It's much better to be able to get nike or four to buy some huge campaign across all of youtube or facebook right. And i think next door probably has a harder time with that. They also have a craigslist competitor. Where you can buy sell and give stuff away on nextdoor nextdoor ceo. Sarah frier told the new york times why they decided to do a fac. She said it made the most sense for next door because it allowed them to be more closely involved in council by smaller more targeted group of investors. Not sure exactly what that means can kind of infer. Maybe it's just faster and easier and get a better sense of certainty about how much money they would raise. Rather than the riskiness that could come with additional ipo process. So you hear that often gluck next door. It's a great product. And i think they do have a lot of upside potential. How much time and money you spent integrating a bunch of different software products together. Let me guess way too much. Well oh do is here to help. Oh do is a suite of business apps that runs your entire company on one platform. They'll streamline your workflow to bring all that information together plus odors integrations eliminate repetitive tasks and gave it entry. If you only need two or three apps to optimize your workflow. Well that's all you're gonna pay for. Oh do would stick with the bill for shit. Don't use and odu has an app for every business they offer. Thirty may naps at are updated regularly and over sixteen thousand aps from their active open source community. You can keep your books tight with their financial software. You can add their sales. And crm apps to help provide a clear and organiz view of how you're doing as a team and here's your simple call to action. Your first app is free forever and now owed is offering a thousand dollars credit on your first implementation. Pack that's not a joke. One thousand dollars off goto dot com slash twist to check it out. Oh oh dot com slash twist all right next up speaker. Nancy pelosi seems to be yellowing call options and so is her husband so should politicians be able to trade options unusual wells which is some sort of subscription service that sells insights into strange stock market activity including reporting large option. Trades across stocks and crypto. Reported that nancy pelosi but millions of dollars worth of call options on apple and amazon in late may so in their tweet they say on five twenty one. Nancy pelosi played amazon and apple. call option. She bought fifty calls of shreiks. Three thousand plus one hundred respectively the worst things in this escorting unusual. The worst things about these transactions is that they were done in may and june but to slows in july incredible when elected officials are using highly leveraged options on maybe private information and now the pentagon cancels their jet contract which benefits amazon directly. Someone always know so. They unusual wells described the current stock situation congress. Numerous house members also trade options. This means they're using leverage positions on leveraged information. In other words. They might know something during their day job. And you buying options as obviously Using this kind of leverage to get a better return zero hedge also covered pelosi and her husband. Paul pelosi who runs a real estate. Investment firm in san francisco called financial leasing services. They gave some examples of what they consider. Sketchy trades pelosi. Bought amazon calls on may twenty first when it closed at three thousand two hundred fifty nine fast words. Six weeks and great news for amazon after the pentagon pulled the rug out from microsoft's ten billion dollar jet cloud computing deal opening the door. Forbe's os and the trade is great today. Amazon is trading at three thousand six hundred ninety six dollars in those calls are it 'em in the money so Paul pelosi in march exercise. One point nine. Five million worth of microsoft call options less than two weeks before the textile worth secure twenty two billion dollar contract to supply the us army combat troops with augmented reality. Add sets in january purchase up to a million of testicles before the administration delimited plans to provide incentives to promote the shift away from traditional automobiles toward electric vehicles. So politicians are clearly using some intelligence that may or may not be available to the public. Obviously you get pretty smart. You have inside information. You may have quasi public information you know. Maybe lightly traded information which would make it exclusively insider and we remember back in february twenty twenty. You might remember this headline just as cove. It was starting to spread outside of china. North carolina senator richard burr. So six figures out the stock. This was just days after. He co wrote an opinion piece on fox touting how well prepared the. Us was for cove in on february seven. So there's a lot of the shenanigans going on and this is why maybe a lot of people in crypto like finance or finance and they liked the sort of wild west of crypto. Because maybe they think that the markets here in the united states that are supposedly regulated or really rigged so congress gets to write laws and they get to trade options Should this be allowed. Obviously business journalists are not allowed to trade stocks. Some of them choose not to trade stocks only to have index funds. And that mitigates a lot of this right. If you're just own the index. You're fine. I don't actively buy and sell stocks as a general rule. I basically have a lot of my companies go public or sometimes venture funds. I'm in will distribute to me stock. I e i got facebook stock at some point than wound up selling it because a fund i was in had a company that was bought by facebook and we got cash and facebook stock so instead of them selling the stock of venture fund will just distribute that stock to their. Lp's you know the the question really here is what should we do about this. Be on one side of the argument. Should people who are in politics not able to play the stock market and be limited in how they make money that seems unfair to some people and then obviously the appearance of this even if they weren't trading on information even if they were just really well educated about these companies and got to see the future because of their day jobs a little bit more clearly because they're in the thick of it and they are around smart people who are advising them. There should be some way to balance these two options. People not being able to participate in equities and people being able to just go crazy buying options and put calls in shorting socks etc between those two very unfair extremes unfair to not be able to trade stocks unfair to be able to short stuff and by putting calls do crazy stuff. How 'bout something simple like. Maybe once a year they can set their trades. Those traits are public. They're reviewed and we all get to see them so if they did on amazon and they did wanna liquidated maybe once a year. There's a thirty day period in which they are allowed to set in their trades and they can set their traced either occur on that day or you know in five trades over the next twelve months or four trades over the next twelve months in other words automated trading. That would make it a lot easier. You do twice a year. Something that doesn't make it look so unfortunate. The timing giver. Read a new story in a magazine or a newspaper. And they're talking really complimentary about. Oh this peleton is amazing. And then you see an ad on the next page peleton. What is your mind immediately. Do your mind says oh. They got paid for that. It might be that peleton is doing so well that they can afford ads and if they're doing so other they can afford it so obviously have product market fit with their product and that might get rewarded because people can't shut up about the product and it gets covered in the news because they're doing so well in other words great companies are going to advertise therefore are they paying things off no but we usually the stories to each other. It does create that problem. Apple is known for buying a lot of ads. Obviously the wall street journal the new york times are going to cover apple. It's the one of the five most important companies in the world. So does this mean one is 'cause at or correlation and when things are happening too close together in proximity or time the immediately goes to causation not correlation when things are just occurring in the abstract. Oh they bought one hundred ads in the new york times and they were covered three hundred times during the year. Okay yeah it's their coralline ones. This is a place where successful people advertise and this is a successful company. That's worthy of being covered. Your mind can of separate them and so that's what's happening here. It's very hard for our minds to be able to separate these two things. But congratulations to nancy pelosi on her new billion dollar hedge fund pretty hilarious. That was a tweet from execs. Some nancy pelosi is launching a one billion dollar hedge fund aiming to make concentrated bets on large-cap tax stocks. She sites her proprietary research method of having inside information is a key differentiator to competitors. I mean it's dark but it is true that a lot of folks who are in came from the hedge fund world or go back to the venture hedge fund world a wall street. For a reason you learn a lot about how the world works and allows you to make really informed bets so okay. let's get to the interview and we'll see you all on the other side by. Are you launching. A new product developing a new prototype. Maybe you're rolling out a new campaign user testing. Lets you see here and talk to your customers to understand how they experience your brand products and services. Put yourself in the customer's shoes with real time video feedback. The user testing human insight platform allows you to target. Your exact audience asked any question or give them a task to perform. How interesting that. It's a tech platform that connects brands with their target audiences. In order to get feedback on any experience testers can get paid ten bucks for their time. These users aren't doing this to get rich now. They're doing it because they really want to help. Make your products and services better so watch listen and observe their reactions so that you can connect the dots and keep improving your product and service. You'll get feedback within hours and strengthen the relationship with your coveted. Customers user testing is used by startups and the world's most innovative brands from all trials gramley to microsoft and capital one. Here's a testimonial chevy's is a men's casual apparel brand that gain valuable insights by asking some of their customers to explain why they love chubby shorts. They also ask for new product suggestions to guide their product. Roadmap think about how brilliant that is it builds fiber between you and your customers because they feel heard and we all want to be heard in this life experience. What your customer experiences. By using user testing request your free trial at user testing dot com slash twist user testing dot com slash quest and get the fast human decisions. You need to make more informed business decisions at scale. All right next up on the program. Alex lieberman is with us. You know him. Because he's the co founder of the morning brew which is an email newsletter for millennials who were into the stock market long before stocks long before the amc short-squeeze long before robin hood. Alex had started a newsletter for people on wall street or young it got to two or three million subscribers and then got bought by my pal henry blodget for i think seventy five million bucks And now it is continuing to crush it. Over at axel springer which is insiders parent company a german media conglomerate. Welcome to the program austin. Sorry alex it's all good you austin's since your co founded the first note they put in was like austin's good we're we're basically the same person Thanks for having me. I appreciate it like to come in on the pot. So austin and you co founded this. What twenty fifteen twenty fifteen. I was a senior at michigan. He was a sophomore and started at while. We are students So you actually did something in the world without anybody asking you to do it. And it became worth seventy five million dollars. We did. And i will say that. I think starting in college was a huge advantage because we for those few years didn't have to worry as much about paying new york city rent and the cost of living in the city. All we had were just like you know the cost of college which lucky walk for us. Our parents were paying for and so it was a great time to start a business in those last few years of school. Well i mean if you don't have to worry about your burn rate as much and you have low overhead low overhead. That is kind of the secret to any media businesses low overhead and email newsletters. Perhaps the lowest. Because you don't need to build any technology correct you champion. Signed the beginning hundred dollars a month for the first year of running our business. It was male chimp that was it. Yeah i mean it's pretty amazing when you when you think about that and then you did something really interesting. You didn't go after everybody. You went after a specific audience. Maybe you could talk about your how you thought about your ideal customer profiles we say in the in the in the investing business or did you not even think about that was not premeditated israel what you wanted to read. Yeah i mean i would say. It was half premeditated we. We didn't talk about it in terms of customer profiles. We are more just like okay so i. I was in my senior year at michigan. I have my job to work at morgan stanley in mortgage trading. Everyone's dream job after school. And so i was trying to you know just basically pass the time keeping my brain sharp and it started helping kids per job interviews. They're recruiting senior year. Nodoze ask him what do you what do you read to stay up today with the business world and basically every answer was like i read the wall street journal and i read it because i feel like i have to because my parents told me to etc and so at some point i was like this is crazy. These kids are working their asses off to have careers in business but they don't enjoy the shit that they're reading. So i started writing a daily business. Newsletter wasn't even called morning brew at that time was called market corner. there was a fighting as the logo. I ripped it off google. It was a pdf that would send out every day hilarious as an attachment. You put it as a pdf and automatically could to people that this is of higher value because somebody laid it out with a with a document management software labor of love. From alex liberman yeah. There was no website so if you wanted to read the pdf every day. I had to you had to ask me to add your email. Address to a school with survey was market corner at you mitch dot. Edu and like that's that's how it started. And that's why ultimately. I brought on. Awesome as my co-founder because this thing was growing where it shouldn't have been growing. It was a shitty product. It was like the hardest thing to sign up for. The friction was ridiculous yet. It was growing and so that was what ultimately told us in the beginning that clearly there's appetite for better business content that is targeted to a younger business person who grew up with the wall street journal but that they only grew up with it. Because that's what. They had not necessarily what they wanted show. It starts growing pretty quickly. When did you know you actually had a business on your hand. As opposed to a project when it makes a lot of times you know people start something as a project. You and i came from the on twitter because i had a similar career path. Which was i started. Smoking our puerto as a sixteen page photocopied newsletter. And there was just a moment. I wish somebody said i to buy four ads. Here's a thousand dollars. And i was like wait a second and charged one hundred dollars for ten issues a year and there was just one morning. I came in and there were fifteen postcards because people talk about friction had to send in a postcard. Twelve there were fifteen postcards where people subscribing don't even know it is. Yeah it's basically you've seen the people in the trump is. I just haven't touched. I haven't touched one at a decade. But but no so you actually. I would say had more clear demand from a business perspective earlier than we did for us. It was like hi graduated from michigan. Didn't have enough clarity that it'd be a business yet. So i went and worked at morgan stanley. I was at morgan stanley. For like a year and a half austin was a senior in college ultimately. He had to make the decision. Am i going to go into banking or my not going to clear fork in the road. Member austin eye meeting up for beers at pete's tavern in new york city chirp in august of two thousand sixteen and we read sickly like we need to make a decision and we made the decision for me to quit my job for him to reject his offer to work in big game for us to do this thing and at the time we had a thirty five thousand subscribers no we weren't monetize ing yet to thirty five thousand subscribers weren't monitoring but we're like we have enough confidence from other newsletters. Whatever that we think. we can convince advertisers. And there's really good engagement. We were looking are open rates all these things and so we i monetize the newsletter in early twenty. Seventeen or i add. We sold for eight hundred boxers a package. We sold three newsletters for twenty four hundred dollars total. I would say we really knew that it would be a business. I would call it like late. 2017 after we had raised a small family and friends round after there was clear appetite for advert like four advertisers to advertise in front of our audience. And we had a pretty good formula for how we were going to grow this thing and we kind of understood that if we grow this thing by certain percent advertising revenue will grow by certain percent as well because we're just getting increase prices as fast as our audience grows so that was a flywheel essentially. You knew if i had a one hundred thousand subscribers. I charge eight hundred dollars an ad each day. If i get to two hundred. I can just move it to sixty. That was something that was literally the formula for like from september. Twenty sixteen to i would say twenty nineteen because twenty nine hundred when we started introducing any other products it was literally just content audience monetization and every higher. We made every decision we made was about one of those three steps. And so like the real i would say inflection point in the business was twenty eighteen to twenty nineteen when we went from a hundred thousand readers to a million readers and that was the year we start doing paid acquisition and basically the combination of doing paid acquisition and our referral program. Working really well explained to me what paid acquisition is. And then we'll go to the referral programs both of those things you did particularly well. I mean having a great newsletter. That's hard but it's not impossible but then you really got focused on those two things. I think people how paid acquisition works and how much it cost you initially and then eventually what you realize a subscriber was worth totally so i would say so paid. Acquisition or paid marketing very simply is paying for advertising on a given advertising channel to convince people to come in subscribe to our newsletter that that was it simply put in we. We did paid marketing on everything from the you know the most scalable channels so like facebook instagram snapchat etc. Where you could literally you know ramp up the amount you are paying to advertise from ten dollars a day to ten thousand dollars a day and you could do that with ease. All the way to us doing paid marketing on other email newsletters where we would reach out to individual newsletters like insides newsletters or cb insights his newsletters at some point. A you advertise it inside. I'm sure i'm sure we did. And in the beginning. I would say we are actually very dumb about paid marketing where we were basically just like. Let's put thirty five thousand dollars. Hypothetically a month into paid marketing. Let's see how many subscribers we get. Let's calculate how much it costs to get those subscribers. If it seems good we'll keep doing now is how is the calculus in the in the beginning as we got smarter about it. What we really focused on was. How do we acquire high-quality subscribers as cheaply as possible and to our proxy for high quality subscribers was someone who opens at least five of their first ten newsletters. That was that was where we saw. Basically you could measure subscriber in the short term but it was very highly correlated with them staying very engaged in the long term and what we basically said is let's optimize where we are focusing on the channels that gets those really high quality people as cheaply as possible and one of the things we found was even though social media platforms like facebook or snapchat. Were very scalable and we could spend a lot of money on them. We weren't actually naturally getting our highest quality subscribers on them. we're actually getting dry by subscribers or something. Yeah yeah we would get drive. Subscribers we would get subscribers that were very cheap like you know a dollar fifty or two dollars as subscriber but super disengaged which would do nothing for us in the long term because they would just unsubscribe within a week or two weeks where we actually were getting. The highest quality subscribers for a while was email newsletters when we were advertising other email newsletters that was always the highest quality subscriber. And you know. Make sense intuitively. When you think about it you don't have to convince someone to read an email newsletter already doing it to just to convince them that this is somewhat different from the email already reading. But it's valuable for you to read. Yes you you do not need to convince an email newsletter reader that email newsletters are cool and a cool thing to confirm the already drink coffee. So now you're cup of coffee a different different brew or something like that so to speak. Hey everybody i thought i would bring christina casio pronounced correct. I'm hoping chris got it. Yep all right. You're the founder of santa people have been hearing your ads on the pod for the last year. And i thought it'd be fun to have you on and you to explain why you create advanta and what socked to is and why it's important people get it right so let's start with what is sock to for people who are just realizing they have to become sock to compliant for sure so suck to is at a high level. It's sort of a customer asking you to prove your security so if you've heard about one at probably come you're probably a to company and you're you're doing sales and somebody asks you. Hey can i have your sock to report or you know. Hey can you go through security review or usually don't phrase it like this but hey i'm going to put a bunch of data in your product and i wanna know if you're actually going to be secure leaked over the internet so they ask you to get a sock to report and these sock two reports are basically a third party saying hey you can trust this company with your data. It's like a standard correct. Exactly yeah so at third party. Auditor comes in. Make sure you're in good shape and writes that report all right. Thanks again christina for explain to us why this is so important for sas companies especially when you start getting into that sales process and you've been very generous. You're making a nice offer. People go to santa dot com slash. Twist what are they going to get christina. They're going to get a thousand dollars off ramp to subscription and we're a big fan of twist listeners. Thanks i know you had a great response for our listenership and they always tell you they found you here so thanks to our twist army and we'll see you next time bye bye. Do the low quality subscribers costs you two bucks. Then you decided. Hey i'm going to pay. What amount for these elite subscribers. Let's call them. You know i would say it was roughly. Let's call it on average six to eight bucks four subscribers and we knew at the time like again in the beginning we weren't super sophisticated to know the exact lifetime value of our subscriber. And you know in the world of email newsletters the way you look at lifetime. Value is basically. What is the average amount of time that a subscriber is subscribe to your newsletter and over that time. What is the per subscriber revenue that you get from an advertiser which allows you to attribute how much revenue that specific subscriber. You can attribute to them the value that they give to you and we didn't know it exactly but we knew that it was higher than six or eight dollars which in the beginning was enough evidence for us to say we will keep paying for subscribers. Given that there's some spread here as time went on we start focusing more on like okay. Well how long is it can actually take for subscribers to pay us back. The what we actually paid paid to acquire them as email subscribers. Exactly and you can. You can literally make a calculation there so that it's just a matter of. How quickly can you make the money. Back how quickly he acquired people. And how much risk do we want to take. It becomes kind of scary all the brands. I built a. I kind of skip that step i went for. I'm just gonna make the product so good. It can't be ignored in gadget auto blocks o'connor reporter in the early days but now it's kinda different in the media media space. There's so much competition that if you don't have a paid acquisition strategy and all your competitor zoo well then you're just gonna fall behind. Yes it's an arms race one hundred percent and that was the thing is like i think in the early days we kind of had this similar type of thought process how you had it which was like we were just like. We think we have the best daily business. Read for millennials bar. None we think that will end up carrying the most weight but over time we were like we don't have infinite money. We don't have a bank that just keeps refilling itself. We have to be smart about this. Especially as a non venture backed business so that was something that we We end up thinking a lot about and the referral program was a huge catalyst us be able to spend on paid marketing so just to give context. The referral program is literally as simple as jason signs. Up for morning brew. Jason gets a unique link. Jason shares that unique link with his family members or his friends. If they sign up for morning brew through that link jason can earn rewards. And as much as like i alex lee remember would have never been the person to share an email newsletter to earn a sweatshirt. It is wild how successful at it has been for us. You know on three million subscribers to the brew over three hundred thousand people have gotten at least one referral ten percent of the audience Which is crazy like you think about. What are the rewards we give to people. It's always been mugs. T shirts crew necks the sunday edition of our newsletter. A facebook group super low cost stuff but that people are really passionate about the brand will want because it will almost be streak credit for them if they get it while. It's kind of interesting you all of a sudden merch in the last decade became such a big product idea and it came in some ways. I think from the comedians and the musicians who couldn't make money in their albums anymore said about it's making our merch. And then you started to see merge come into startups with stickers. I remember all startups which is hand each other stickers in the two thousand time period two thousand to two thousand seven that web two point oh period because we all have laptops because laptops became like a status symbol and you know ipads or iphones yet. People just use laptops to slap stickers on it and it was like a trading kind of merit badge. Yeah it's like after pro athletes ended up swapping jerseys. This was jersey swap for for nerdy. People it turns out eighty percent of robin hood's users were acquired either organically or referral program while breezy and. It was kind of interesting when i when i when vlad pitched me on robin hood as acquire customers. She's like easy. We're gonna give them a free stock. I'm like you're going to give people money in the form of a stock. he's like. Yeah but you know. Think about it you know. They're spending two hundred fifty dollars to acquire. new trade. customer is again. As do they do television. That's all they do is television. Everything else has been burnt down. Did you invest robin hood. Yeah i invested before it launched act shot realized that. Yeah it's worked out. Yeah it's done okay. It's done no. That referral program is amazing. Right because to me. It's like one you're being paid in money but to you're being paid in the exact asset that is the reason you came to the to the actual product. It's it's like literally here is giving you a free casino chip. it's actually. It's exactly like that. You know when you hate to use a gambling analogy but they used to be buses on canal street that you could go to. What's the gambling place south of new york city atlantic city. And they would. If you took the bus you'd pay twenty bucks at the bus. But they give you ten dollars chips or a roll of quarters or something so you could then go play slots this way back in the likely to take the bus kind of incentivize people like okay. I'm going to pay ten bucks to get on the bus. But they gave me ten bucks and chips in totally that casinos. Got somebody in the door and they can make money on from there and it's also it's it's such a good thing not only just like incentivize you to share but it's also such a gray retention tool right because then you have your stock in your app that you're now incentivized to check every time the markets making a move exactly incredible so at some point. You realize you decide you're going to sell or you'd never raised venture capital for the business you family. We raised friends and family raised seven hundred fifty k. Well on a convertible note at the time awesome. I knew nothing about. Vc like we're finance guys like we were finance guys who were more into like banking and sales and trading on wall street nod vc. And so we had you know in talking to the few entrepreneurs we knew we. We just heard these horror stories around. Vc until like without at the time as college doing our diligence. We were just like. Oh no like we want to control our destiny. This is exactly why we're starting to brew and we didn't really do the homework to really understand the nuance of vc. To raise seven hundred fifty k. From family and friends. And actually i i call family and friends. It's more of like you know friendly rich people in in in our circles and that was we ended up. I would say if hindsight's twenty twenty if we had raised that proper amount of money we probably would have raised like three hundred before the business actually started kicking out money and be able to reinvest. But that's all that's all we ever raised. And then i mean that can be in a way. I tell people the the amount of time it takes to raise money can be so long if you do get more interest than what you originally planning. If you get seven fifty instead of four hundred you have to ask yourself. Can i deploy that money intelligently and so if i take a little bit of a hit on my ownership percentage if it allows me to keep my head down and not have to go raise again and have that distraction and it gives me it insurance downside protection i would. I would think that through if you're a good steward of capital. Some people are just not good with money in their pocket. Like i had a friend. We we go. Cash our checks and lower manhattan like every two weeks after work and like that money would be flowing out of his pocket and are like i'm going to deposit my my bag again. Everybody else in the business. Who used to fix printers down lower broadway we go to the check cashing place give them thirty bucks for caching their check and get back literal cash in their hand this before size. It isn't that hilarious. I lived at its mild before direct deposit existed. I remember them saying like. Do you have a bank account. They're like you should get one because then you got to do direct deposit and what they did was. If you've got direct deposit you got your check. You got money in your account on thursday. And then the people who didn't got their checks they. Somebody would literally walk around the office at three or four pm. On fridays and hand people their checks and they would just race out to the check cashing pace. It's well at the time. I'm sure beverages look was like this is normal. There's you know there's nothing else where we can can compare this to. We look back and we're like. How did human beings do that. It's like so there's you're always you're older. I mean i literally when i did my first email. Newsletter was silicon alley dally in one thousand nine hundred eighty six or seven because i was competing against at new york which was a weekly email newsletter. Then i had the print magazine silicon on reporter and then somebody else had like a mother monthly email. A monthly newsletter night turned into a magazine. And i and the other person alley cat. I think it was had events and then at new york had the email news. I had the print magazine. I just had this moment of clarity like those people. Look down on me. 'cause they really look down on me because i wasn't a journalist and they were like ten years old journalists like screw those guys explain to me their business like in this person's businesses they get paid a thousand dollars. Everybody comes to their events. We're going gonna have events business. What's other businesses weekly. I said great. We're doing silicon alley daily. And that's when i had were fought ali will leach bunch of like really cool rider sheni jordan and we just did silicon valley daily but at the time there was no male chimps o'brien alvie setup q. Mail servers for me so we had a rack of servers in our offices on thirty seven. Th street and we would get the newsletter all put together and then somebody would go over to the rack of servers. They'd have the computer brian. You'll be sitting there okay. Give me the file. He get the follow stitch it together. He'd run a script and it would go out but it would take five hours for it to go out. And i said what if we had like five servers is. We'll take one hour. How does that work and say well. I'll break the mailing list up into five challenge. God and then. Every time we get a new subscriber i'll add them to either one through five mailing lists. We'll have the five servers and we'd all just sit there and watch the servers cranking because they had lights on them and we had a t. One which was five thousand dollars a month which nobody had ninety seven. That's how we did the first newsletter. I if people ever wonder why. Aws is valuable that this is exhibit. A what inbox or esp. Do people use like g. Mail wasn't a thing at the time. Right yeah people used. There were all kinds of male clients like qmeil and while a cumulus server. God what were the original email client. Names was outlook thing or not yet. No no no no no no no. I forgot the name of it god. Oh eudora eudora dora. Dora was the popular like cool kids. Use your door email client and the way it worked was you would fire up your email browser your email client and you would hit their refresh key. Then it would go hit the server and take your email off the server and then onto your local device and it would be gone forever. There was no cloud at the time. Yeah and if you didn't download your if you didn't hit that button download my email enough. You would run out of email storage space really quick. So that like the bane of everybody's existence because somebody would do a spam campaign. It would fill up everybody's email servers. Everybody's email will go down everybody's email would be saying there's no more room on the server which would then exacerbate the situation right so they're always like outages occurring because somebody would spam the network. It was really song. Sounds like this. That i wish i had like a time capsule that i could just go back to that danger. See what living life would be like with just like the way you had to do. It became really cool. Was i had this email list in the you know that i realize how valuable it was that this was my big click. The add new york is were real journalists who taught and went to columbia. I was just a hack. But i was like daily is better than weekly. 'cause what they started doing was these fm pr people. I would put somebody on the cover of the magazine. It would leak. Who's gonna be on the cover of the magazine. The at new york is with an interview them and put them in an email interview two weeks before the thing came out and that i was like okay. Now not gonna tell people who's going to be on the cover of the magazine. Were doing three photo shoots for everything. And i told people who have. If you leak that you're gonna be on the cover and you do any press between now and then you're definitely not getting the cover and the cover will be determined by whoever does the best photo shoot and then that's how we got all these incredible photo shoots as we love people. It was like a practical thing. But then let's do daily and we will just crush them. Because by the time they do their newsletter everybody will know every new store. Yeah you'll just be. You'll you'll firm run them. I front ran them so hard. And then i like i was so competitive back then that i just started doing events and demolish the other person's doing the events by just lowering the cost of the alliance dollars a ticket. It's funny obviously. It's like You know a decade or two difference in time. But i would tell you like the stories of our new newsletters actually quite similar. Even just like austin is not being editorial people at all people hated you for that. Yeah we were just writing the newsletter and then you know our managing editor. Today who doesn't matter what content company al matt like. i would always want him by my side. He's incredible he has no traditional journalistic experience for school newspaper. And that's it. It's almost better in a way. Don't you think like that. They don't have the pre. Yeah i mean. I think okay look i absolutely believe. There's there's absolute value in being journalistically trained and knowing how to report well but so much of our business strategy with our daily newsletters in the world of curation curation and remixing and if you're in the business of curation and remixing i would say like the ability to know have great taste to be able to write both in an informed but entertaining manner like those are not things are taught in in capital j. j. school and so we didn't need that for daily newsletter necessarily and you were aggregating more than doing original content in the at the start right. Yeah i mean it was basically. We were saying okay. What are the four or five stories. That are the most important. We'd read six version of versions of the story and then we'd ride up our version in one hundred fifty to three hundred words and then nowadays. You're doing more original reporting. I mean that's you have one hundred people now. Right on the yeah. We're yeah where one ten now and the way we think about the business is basically it's broken up into be to see him beat us beat to b and bb business has our industry or function specific newsletters right so we have marketing brew retail brew emerging tech peru And we are going to be launching a fourth later this year and those are very much so like more focused on reporting because the whole idea is like if you want to help. People make more informed decisions in their jobs. You probably me to actually go deeper into telling them like why matters and how they can think about it Whereas on the beat assise. I with the daily newsletter. It really is. It is a cover your ass policy. You read the daily newsletter. So that when you go talk with your friends you're not caught off guard and look like an idiot and so it serves two very different purposes. Yeah going deeper giving analysis different different time her. You find that. These new generation of journalists. Don't wanna report on stuff and more wanna do advocacy journalism. Now that they see that. So much of the even the traditional publications whether it's cnn or tricia news outlets new york times going short of anti-trump wall street journal dig in their heels in a little more conservative with feels like everybody kind of became more advocacy base. Did you see that in hiring writers where they wanted to take on a certain position as opposed to writing. Just what happened. yeah. I mean a little bit. I would also say we've always been very intentional about saying up front like the brew is not going to take positions that that is not the game that we're going to play. We are all about taking informed views and doing analysis. But if you're going to do that you need to back it up with facts and you also generally. It will be better to share the counterpoint of why this may not make sense as well but i will say absolutely in a positive way as a younger media organization as big things are happening in the world. We we get. I would say what is productive. Push from the team to talk about things that maybe aren't inherently business related but it doesn't it kind of as a matter you need to know about it regardless as a human being not a business person yes being aware of black lives matter or what's happening in a conflict in the middle east. Yeah exactly. that was the recent one of like you know with the conflict in the middle east. Does that impact impact domestic business or like your job today. Probably not directly. But if you don't know about it you're an idiot. Yeah you want to be informed but did you have people on the staff who were like. Oh my god you know. Israel's right israel's wrong. I mean it seems like people were really demand never saw. They were demanding that tim cook apple imposer demanding. Tim cook take a pro palestinian. I think they were trying to take them. Take a pro palestinian human rights position. Where the fr- you know there's an equal framing of yet but there's another city having bombs and suicide bombers and if that was new york when it was new york i should say sadly we level two countries like what exactly is going on here so we yeah we weren't. We weren't pushed to take a aside like that and team members interact. And i don't know if that's a function or culture the function that were one hundred ten person company and not guilty thousand person company. But we didn't. We didn't deal with that. What are your thoughts on. All the stuff that happened with coin base. Thirty seven signals. And hey we don't want people in slack rooms talking about these issues issues yada yada. I think it's the type of thing where my my personal belief is that like people should be able to talk about whatever they wanna talk about. As long as it's done with respect like that that's kind of my point of view is as long as you respect people. You can share your perspective the second you don't respect other people's opinion and become a good listener this second. That's where like you run into territory. But you're okay with people at work during work time popping onto a random slack channel and discussing i know the israeli palestinian conflict or or race issues. Whatever my view is it's going to happen anyway. Like my view is human. Beings are human beings their thoughts are gonna pop into their head. They're gonna look for someone to talk to about it if they're not doing it in your slack channel. They're doing it over. Text message with a person from work as well. And so yeah. I think you're just trying to fight an uphill battle in changing how human beings think. Yeah i i always tell people like. That's something to do in person like don't do that on slack. Because my god people's feelings and misinterpretation happened so easily over the general thing that inter like to me. This is such a hard thing. We're you know you're joking before. About how like. We don't see people in person anymore. We're all remote working like me. That's actually a really tough thing about when people just communicate through slack like there's this whole new language that you need to have understood between people like i was joking about the other day. But it's like boomers are known for saying the word like okay. Okay period millennials. If they're just like you know a happy person or a normal person is like k. K. and so then you're caught off guard when someone your age says okay like are they pissed at me or do they. Type like a boomer. And that's like the most nascent like the the most unassuming example. But i actually think like tone is the hardest thing in tax and they're so much misunderstanding. That happens when you're in an all slack environment. I basically have to. Because half of what i say on twitter joke. I literally have to do the rolling on the floor emoji. Oh yeah just. That's my preemptive because so many people read my tweet and they're just like they take this serious approach to it and then the superman joke. Yeah i'm like here's this superman. The joke gift where the word the joke flies all around him. And he's looking around like whoa. What's going on here. But i mean it's very different for you. Who's your news organization. People are used to talking about tough conversations. As opposed to a bunch of crypto folks in chat room who might have very weird views of the world or i should say unique. Views of the world crypto people tend to look slightly differently than normal people. What are the other crypto thing. You think this all giant multilevel scam where you afraid to say what you think. You're going to get a thousand people over not afraid to say. I think. I think the reason i'm on fascinated by reading it in studying right now. Is i've had enough part. Smart people say that this feels very much like you know the early two thousands early ninety late nineties all over again. Oh my god does and and so to me. It's like if i'm going to be an intellectually honest person. I'm going to study it to see what it feels like. Mom you know. Have i bought. Bitcoin yes have. I bought bitcoin. That shows a shit ton of conviction now. Or i wouldn't have bought more of it but to me. Also you hate bought it. I somewhere between hey buying it and conviction buying it no like i. I think there's a fifty fifty chance that bitcoin is going to be digital gold. I don't right now. Think it's going to be a medium of exchange that said no. I think there's a fifty fifty chance. One would argue that. I should put fifty percent of my net worth in it. I'm hurting per fifty percent of my network in it and right now i'm going down the theory in rabbit hole. It's very tough because there's this shit ton annoys right now and so what i'm just trying to understand is like how do i think about what is actually going to be valuable ten years from now at what is just noise because there's very smart people talking about what is both and signal stuff that is going to be very valuable and stuff. That isn't an. I'm basically trying to for my view of who are the smart people that are wrong and who are the smart people that are right. It is exactly like the two thousand time period or the five years before two thousand in the web onepointoh days. You have this very promising technology. That was very nascent and confusing and hard to use as i was saying like to send an email newsletter you have to rack servers better and then what happened was it had so much promise. And the early hackers and people you know putting the servers in and getting t one line in figuring out how to set up their ip routers and everything in their offices and their mail servers that group of people then started to build stuff and then all these charlatans and people who wanted to make get rich quick came in. And we're like yeah. Let's put some lipstick on it. Let's take a public. you know how. How can it get a billion people are going to use it and then obviously it all crashed and then the rebels started and man there. That's how google and totally facebook and everything grew straight through those moments and so dependent. I think if you have a really long term view and you held onto a hundred stocks that went public. I mean if you had amazon in that group or google you would have been fine but it feels a lot like that. Where like i is there. A google or amazon and all of this because so much of this feel so scammy and also i. It's weird in the sense that like if you wanted to bet on the internet at the time how could you bet on the internet. You'd bet on a bunch of i assume just like a bunch of individual companies whereas people make the argument today if you want to bet on the next internet you're betting on a theory him but this concept of buying a crypto currency. That is both a bet on a currency and bet on the internet. That is not a bet that. At least i can see like a a historical data point you would have been able to do. There was no way to bat on the apache server or like a web browser just by arguing by netscape at the time but that got crushed because became fraser. There there wasn't like an an an economy built into the infrastructure. Like there is with crypto. Yeah so i think it's i think it's really interesting. I think they're what i will say. Is there a specific applications. That i think are really interesting. I think the application that you know. Mark cuban talks about of the resale market and and teams being able to capitalize on secondary sales by scalpers makes a lot of sense in my mind the ability for musicians to allow fans to participate in the upside of their albums and cut out there. Labels mix a lot of sense in my mind. I would say there's a lot more shit right now that doesn't make sense in my mind than the applications. That do which is exactly what happened in the internet. People just set internet plus and they would just pick two random keywords clause restaurants and you'd be like okay internetplus restaurant. what do you mean like. I don't know menus online or reservations online or yeah just reasoning by analogy which is like you take the internet. You take an old thing you combine the two and it must be valuable because the thing is valuable. Why there was like every category has to have something where billion dollars instead. They're like okay. Cds plus internet equal cd now or something and there was literally a company that went public. That was i think cd. Now that give me fifty million dollar shave. Well to be the official provider of cds for aol like music cds and the music calorie. It was really a kind of a strange bizarre time to now you're getting into angel investing and investing in companies. Something about that. Am you know we spoke about an and basically i feel like a lot of angels go through kind of this come to jesus moment but basically what happened was i started writing a few checks i wrote. I want to say three or four checks and at some point and i had no strategy. I was just like this is fun. I'm backing founders. I'm getting onto cap tables. And then i was like okay. This is actually not zero dollars. Now it's actually enough that it's enough money that i should have some sort of strategy and so then i step back. I didn't write any checks for call it three or four months and it was like. There are three possibilities that i could do. They're not mutually exclusive. But i should probably pick some combination like one right individual individual checks into companies the most risk loving part of angel investing depending on also how many companies i'm writing checks into the second is being lp in funds positive as i'm getting diversification of some sort in the asset class. The negative is that i'm not really getting close with founders or like getting my hands dirty and then the third is start. My own fund started rolling fund star normal fund. Whatever i ruled out number three pretty quickly because my view is like. I don't want another job right now and it quickly becomes another job now. You have two sides of the marketplace talking to you. Not just one side right exactly and i think there's a point in time in the future where i absolutely could like it but i didn't. I didn't want to be responsible for other people's money yet. And so then one and two. I was like it's probably going to be some combination of both of these but what i said to myself and i was actually after our conversation and i'd read your book also and i talked to a bunch of people i was like. If i'm going to start writing checks. I need to write more checks because three checks a year for the next ten years is probably the worst approach i could take in terms of. I'm not the world's most risk loving person but it'd be a strategy. That made me like think that i have like balls of steel and so my strategy is over the next year. I'm going to write fifteen ten thousand dollar checks and my whole view is not going to size up with my initial checks more than that because it starts getting to be really significant money. The ideas like i'm reading a lot of checks to bet on founders to also refined my way of thinking like every check. i'm writing now. I'm writing a memo to myself about like. Are all the questions that i'm asking myself for why you know. Why is this going to end up working out my views. It's a call option. It's a call option so when the founders inevitably raise a abc by get the look. And that's where i could size up. Because the risk profile the business generally will look a lot better or lower risk. Yeah i think it's a great strategy. I mean if. I could go back and do it again. I was the single bullet. Bandit i would just make one bat in uber or one bet in robin hood. I wouldn't make the subsequent bats. And i would own basis points on a company that i started taking my pro rata and i started to own you know. I don't know you know. Two percent of superhuman five percent of ofcom. Whatever it is. You know smaller but significant chunks. That i started doing the ten to twenty percent ownership and it was a process over a decade of being a single twenty five or fifty k. of sequoia scout money to eventually my own fund and then the syndicates. It is a lot of responsibility to have other people's money but it also makes you sharper so totally. You're doing great. Because because you're writing the deal memo you now can look back on what you were thinking when you made the move right is i have a friend. Who's a celebrity. I won't say his name but he had a book with him and he was always like more playing poker writing things down and he's very famous actor writer. Comedian kind of guy and the what are you writing that book he said. Well you don't have ideas or whatever you write about your poker hands. And i'm writing about my decision making for big hands too and i was like wow so smart so smart and had this was a concept in the last year that i picked up through like listening to a few podcasts. It was actually. I think you're on at some point. Chain parishes podcast on its project. It's yeah yeah exactly knowledge project. He writes farnam street and i was listening to his podcasts. In the also has an article on decision journaling. And i started keeping decision journaling. Unlike all different things in life angel investing the new hires were making it. The baru other just like life decision that actually have nothing to do with work at all is and it's i mean. It sounds kind of ridiculous but it really is like. Are you writing decisions. Should i go on a second date with this person. i'm ready. i'm ready decision journal. Unlike why decided to move to hoboken and why decided to rent an apartment versus not by an apartment right now. I like it. That's great and to me it. Just it closes like just makes the feedback loop shorter of was i thinking in the right way and and yeah it's interesting with with the angel stuff that what i'm also realizing in kind of the short time i've been doing it is. I'm getting a lot of deal flow. I feel like i'm not getting tier deal flow yet. Give it time. I'm getting deal flow and so it's it's making it interesting to think about like should i be holding out till i get to your idea flow or should i be writing checks in the tier bs. So that's one way. Did you come to that. I still think that i should be writing checks in the tier bees. Because i think. I'm not good enough yet to actually distinguish between tier as interior biesen. Several tier bs could end up. Actually being really significant companies. So that's one thought the other thought is i'm noticing. More and more companies obviously want to include operators and other entrepreneurs on their cap table. But something i'm sending a lot of time thinking about is like how can i add value when you have you know the sequoias the a sixteen z's the the jason cal kansas is of the world. What can i do to be different. That will you tweet. You gotta get twitter following. Yeah yeah that's that's a start. And all money's green so if you're a founder you you have to do something to raise that i four hundred k. And high profile people like yourself wind up being an unlock and social proof. So when people told me that you know when you invested it helps me get other. Investors like really house like those investors are like famous and they're really successful that like. Yeah but you know they know that you did these two deal so therefore you are but you when you go back and you think about that decision to move to hoboken good wifi at bars fifteen minutes to manhattan new construction. Lots of dogs. Dogs shrunk say same price of an apartment. You got a three bedroom instead of a one bedroom. That was probably the right versus manhattan. Oh yeah wow. I didn't really said that's that's three bedroom place. We're looking at the downside. Oh you have to say you live in new jersey. And i love the book like where do you live. And they're like. I live in new york area like manhattan. Like yeah right by manhattan brooklyn. And you're like no no not brooklyn. So you live in queens not acquaint you said you live in manhattan. You live near manhattan. New york would not brooklyn queens bronx. It's actually it's actually the new york city italy of the tristate area. Maybe italy when they had that garbage strike garbage rely two months. Oh my lord but no anyway like the angel things. Give me a ton of energy like i would say obviously the does give you a lot of energy so one is like there's the money side of it but i would actually say that's the thing that's not giving me the most energy the thing that's giving me. The most energy is the feeling of going through the process of learning a lot about a space that i don't necessarily know a lot about and refining my thinking about it. It also just as like as an entrepreneur. It's making me feel like my most creative self like it feels like it is is almost giving me a ticket of momentum momentum of ideas momentum of potential new things to test and do within the rue with outside of the brew and so i would say it's like that feeling of momentum that feeling of having my most creative self like that is the most energetic part of this so awesome. Yeah you'll find the thing. I would say about the tier be deal flow. They'll be two types of deals you'll get one is they've been on the road forever. They can't close any deal. And therefore you know it's kind of people who are not clearing market so they're going to become as you said the chances of them not being able to clear market and then your check being able to make an impact is probably low right yep but then there are things that are just confusing to people and i would say uber dot com. Were very confusing. One thousand nine hundred twenty thirty six out of forty something in that range would say no to those two deals and so it could be that it's just outside of people's thinking and the way i reconcile that was is this person Absolutely building a great product and people just don't understand the market and calm uber kind of fit into that people didn't want the risk of uber operating the real world. Meditation was stupid and you could get it for free. So why would i. Well that'd be like saying to the morning brew like oh you're getting this email newsletter breaking it that information on global news. And you're like yeah you don't get it. It's not for you and so that to me. That's like it makes me think of two things. One is like in the inventor. Investors heat like having to be able to be really good at empathizing with the customer. Even if you're not the customer ivy league is a skill in itself because to your point it's like even if hypothetically you weren't into meditation but understanding from the perspective of someone who is into meditation why they would actually really enjoy this like that is a skill so i think i think which startup are you like really excited about their product specifically like their product just just making a while so that tangle feeling yes i mean i and this is not a company that i invested in but like i love. I love notion. Like i've used notion a lot over the last year. I it's just so simple and it's it's so simple but the fact that it's become so sticky in my life i think is is a really cool thing And then the other one like this is. This is a little bit more specific but circle which is a startup that actually think my co founder invested in but we used for morning brew launched a paid course. Let's call it paid course in the last like six months. It's called morning brew accelerator. We ran this community on circle and circle is kind of like if slack had a baby with like youtube and read it in the sense that it was created with community like cohort communities in mind and yeah circle dot com. I know this. I know this. Yeah it's yeah and it's a former guy from teachable. I believe and the experiences is really really good. Like if you've ever tried to run a community in slack it gets really shitty really quickly. It feels like it was built for communities. Which i think is really cool. I gotta try. We've done this experimental this week in startups slack and so much work to manage it. It doesn't make any money just trying to think of. How do i make something that would be worth it for people. Like what will they do in this space and have enough money coming in from it. That people could afford to put somebody on to manage it right. Yeah that was going to say. That's always the hardest thing is like even where like the community does make sense. How do you make it. I do not get it to be dilutive really quickly. And how do you extract money from it. That's been the hardest thing with communities like one of a community business. I invested in. Oh you invest in whistle savvy. Oh yeah for sure. Great we incubated. Yeah yeah. I think you know what they're doing is amazing and one of the challenges that they've obviously seen that every community seas is like as you grow the audience. How does howard there are. They're not negative network effects. Were of everyone's like a really felt intimate when we're at one hundred people now. Are that ten thousand. This feels really like people. Don't actually give it about sneakers. I think they've done really smart stuff around that but that always is the issue with communities communities can collapse on themselves and then the person coming in at the end is just like i'm here to spam the community and i'm just like i created a room called offers in promotion and it's basically a honeypot. Just tell people you can promote whatever you want however you want and offers and promotion. Just don't do it from fake accounts and don't ask people to fill out type forms like just some very basic information and then inevitably somebody posted that then you search for their name and your second stints and you'll see them go to other room. Oh yeah and then spam those other room. It's perpetual solicitors. Yeah so then we were just like and we just turn off their town. We don't even tell them and then they email me like. Hey i was in the thing. It's not working and you're just like so weird. I thought it was working no. I don't even respond. I'm just like you got a message at the beginning. Saying there's only one place to prost promotions and you posted for places. I told my team. Just bounce of. Don't even tell them. Let them just suffer in there what we had. This could actually interesting. Brian avi had built on in gadget. Where for commenting we have this like ghosting thing that peter rowe haas and ryan block and brian via come with which was a way to frustrate trolls which was when they were allowed to post comments. And it was. It was called something like purgatory mode so they could one click put somebody in purgatory mode. And what i'm making that up. I can't remember what would it do. Well you could still post and you would see your comment there and then nobody else saw your comment though so literally. It made you think that you were getting in front of people. S that's amazing that's amazing this little innovation so you'd have people who are spammers and they'd be like it would keep posting their spam purgatory mode. They with then they would email us and say. Hey you know somebody on my comedy. I created a second account. I looked at the first account. And we're like. Oh yeah that's interesting. Maybe it's your cash. Have you tried clearing your cash. Which also forces them to admit that they've been trolling the basically. It's so great it was. It was purgatory. Mo was one of the great innovations of that title of that. All right. listen it's been great to catch up with you Continued success in your angel. Investing career remember a slice for jake. How and so now we are you still involved with morning brew kinda like exact chair and kinda got the window seat. I'm execture. i'm helping. Austin where wherever i can all right so you got the window seat. Yeah and i would say doing a lot more on the content creation side due to build my brand work on. Podcasts shows like that. I like being. I like being close to content. Yeah i think. I'm going to be on your. What is the name of morning bruce. Podcast again we have business casual and then founders schedule. Yeah yeah. I think so. I think i got an invite to be on. And i couldn't do it last month but i'm doing it later. This month. sweet awesome. Yeah i'm looking forward to it all right. Alex continued success. And we'll see you all next time on this week. Startups bye bye.

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Jessi Pujji - A Primer on Performance Marketing - [Founders Field Guide, EP. 27]

Invest Like the Best

1:34:31 hr | 4 months ago

Jessi Pujji - A Primer on Performance Marketing - [Founders Field Guide, EP. 27]

"This episode is brought to you by vanda. Does your startup me to sock to report to close big deals or do you already have a sock to report and wanna make it. Easier to maintain vantaa has built software. That makes it easier to both. Get and renew your sock to with antics. Continuous monitoring solution you avoid hosting auditors on site and taking screen shots to prove that you're compliant so you can focus on building your business fanta partners audit firms. Who file your sock to report directly inside advantage at a fraction of the normal cost. Hundreds of companies including more than one hundred y combinator businesses are leveraging today to streamline compliance and focus on building their businesses founders field guide lizards can redeem a one thousand dollar off coupon advanta dot com forward slash patrick. That's advanta dot com slash. Patrick this episode is brought to you by linked in jobs twenty twenty one these new opportunities to grow your business. It part of your strategy is adding new members to your team linked jobs. Find the right person quickly to make things better. Your first job post is free with linked to get access to an active community of professionals with more than seven hundred twenty two million members worldwide. Lincoln is the easiest place in the world to post a job and message qualified. Candidates getting started. It's easier than ever now. You can do all this from your mobile device. That's how elected jobs can help you hire the right person faster when your business is ready to make that next higher. Find the right person with lincoln jobs and now you can post a job for free. Just visit linked in dot com slash field guide again. That's linked in dot com slash field guide to post a job for free terms and conditions. Apply alone welcome everyone. I'm patrick o'shaughnessy and this is founders. Field guide founders. Field guide is a series of conversations with founders. Ceo's and operators building greek businesses. I believe we all builders in our own way in this series is dedicated to stories and lessons. From builders of all types founders. Field guide is part of the colossus family of podcasts. And you can access all of our podcasts including edited transcripts show notes and resources to keep learning at join colossus dot com patrick o'shaughnessy eeo shaughnessy asset management. All opinions expressed by patrick and podcast. Guests are solely their own opinions and do not reflect the opinion of o'shaughnessy asset management. This podcast is for informational purposes. Only and should not be relied upon as a basis for investment decisions clients of shaughnessy asset management may maintain positions in the securities discussed in. This podcast guest. Today is jesse puji the founder and ceo of gateway x a holding company that builds buys and invest in companies that are driving the direct to consumer landscape prior to gateway acts. Jesse was the ceo and co founder of ambush a performance marketing business helping power customer acquisition across. The world's biggest brands. jesse's my go-to person for all things performance marketing customer acquisition. So we decided to record this episode to bring his incredible lessons to a wider audience. It also dovetails nicely into the series of episodes were called primers where we take our audience from zero to seven on just about any topic in this primary with jesse dive into how revenue mechanics affect ad campaigns. Why long sales funnels offer the greatest opportunities for differentiation and the various channels and strategies available for performance marketing. I hope you enjoy my conversation. With jesse kluge legal issue with these episodes is to provide access to the best ideas and people in business and investing. We will soon be significantly expanding the scope of this effort to make it possible at colossus. We're expanding the team. In hiring to critical early roles the first position will be our lead mobile software developer. This person will lead the development of our mobile applications which will change how people learn together. The second position will be our lead designer because the existing team lacks and you. I design experience. This person will have a blank. Slate to creatively designed new applications from the ground up to learn more about both roles visit join colossus dot com forward slash careers now onto the shelf. So jesse the first part of this conversation is going to be what. I'll call the definitive conversation on performance marketing and i guess really just marketing generally speaking to set the stage as to why you are the right person to be having this conversation with. Just tell us the short history thumbnail version of an push how it got started. And what you've been doing since its founding. Yeah sure. I was not born. A performance marketer. Rank wouldn't wouldn't have expected myself to end up here. Ten years ago is i was working at goldman sachs and i went to wharton and if you go to wharton goldman sachs says the goal of every word kid. I got that ring and my dad was an entrepreneur came from india. I grew up around that entrepreneurship. What i thought i was going to do. But kinda said man. I want to see what it's like to be an investor and learn about that. And you know i liked it but i didn't love it and i said i wanna love what i do and so pretty much on a whim moved out west and said hey i'm gonna start a business and was as in love with the idea of starting a business as i was about and i specifically wanted to build something building organization culture and said you know what let's bootstrap this thing. We don't want to raise angel round and then have a gun on her head and burn money. We want to get something that can make money from early on. And we went around talked a lot of mentors and friends and they said oh you're good with numbers and data go look at performance marketing. That you'll figure something out there and we started calling it sandbox entrepreneurship. which was. We're not going to come up with an idea. Sitting are goldman sachs as what we get in the sandbox of something. We'll figure something out and so we kind of did it like nerdy. People would pick a business ideas so he's okay. We got it number. Zero online marketing. That works will. We don't have any relationships with anyone. We're twenty-five years this. this is late. Two thousand nine early thousand ten or don't know anyone don't have any relationships so how do we get into digital marketing. Well there's this thing called performance marketing netflix's invented it and they'll just pay you kind of like a bounty. They'll pay you fifty dollars or one hundred dollars every time you get them a customer you take all the risks and you make the margin and we go arbitrage. That sounds familiar like. Let's go do that right. And let's go figure that out. We started poke around and we said we'll give you a shot. You don't need to have a relationship because it's just they just say. Hey if gamers great. I'll pay you and so we went around and did that and then the last funny part was said. What's good sector to do this. And we don't know and at that time if you remember online for profit universities where the big thing Because university of phoenix kaplan they were the largest digital marketing spenders at that time because of financial crisis all these things are happening that on outlook the government was basically paying for it so they said oh those guys will buy leads from you for fifty dollars for perspective graduate student and we did not realize i see that industry has until we got into at the time we decided. Okay cool we're gonna find liza and we went to our first conference yet to get these allegations from people of leads for tests and we find this guy named matt. He was head of marketing at kaplan university. And we give them this crazy pitch. We're like we're wall street. Guys we're using algorithms are doing all this fancy stuff in marketing. And he's like okay. You're brown. I'm brown like here's a here's a fifty thousand dollar contract. Give me a thousand leads next month. That's kind of how the business started and we started doing that on search marketing. We built all these fancy keyword structures and using natural language processing and we thought we were super smart we worked at goldman sachs and we launched our first google campaign and by two hundred keywords. We thought we'd found all these unique keywords. I wanted to figure it out. And we spend ten grand and remember. We're getting fifty dollars per lead and we get ten leads. So fifty dollar revenue per lead thousand dollar cost per lead and like the floor just dropped out from underneath us. I mean we were shit. Scared and the funny thing was my dad's an whole life. When he heard about the kind of money people make goldman sachs. My boss was in her early thirties. Making millions of dollars he couldn't understand. Why on earth would you ever leave. That makes no sense to him. And and he's a he's a triathlete incidentally and he runs an eight minute mile. I'm living at his house by the way bootstrapping. I'm living at his house. He takes a job. And i really ten minute mile right. I'm probably like young. Twenty s a little overweight phase. And we're running at a nine minute pace. He's i just yelling at me. He's like how did you not think of this. The what made you think you could just get into this industry and do whatever you wanted. And he just couldn't believe in. I can't breathe. I can't even respond not keep up. We went through a ton of iteration and honestly the way we ultimately figured it out was the week of my birthday twenty ten. We literally got one keyword. We copied a competitors landing. And we just said okay. We're going to do exactly what that person's doing and see if the economics can work and they did and took us three months in between the thousand dollar leads in that trying different landing things. We really fancy landing pages that we thought were things and it turns out. This demographic want fancy they wanted to. Yeah we just learned very first hand. You don't know anything you just have to keep testing. Those first lasts ends and the business was okay at that point was canal positive not really cash low positive and we bootstrap everything. This was like three wall street kids to thirty three k each of their bonuses and put it into thing and one hundred k. To start with a bunch of credit cards that was how the business started and then right around that summer. Facebook launched their self serve ad platform. And we sort of the generation of facebook we said. Oh let's give this facebook thing and try and i like made the first ads and literally. I could tell you this minute they were. Those were masters in teaching for usc. And the headline was sick of being assab question. Mark and i put a little clip art of like a mean woman with like a stick like this looking mean teacher and said. Go back to usc and get your master's in teaching. Click here and i kid you not. I mean this was maybe be a few weeks into trying on facebook. I came up with that idea. We were making five percent margins on google. A fifty dollar leads replacing us forty five dollars. We started getting ten dollar leads on facebook and is like one of those moments where you pinch yourself you look at your this real and then the next week we got a call. Usc person we were in trouble or something goes. These are like the best leads we've ever worked in our life. Can you get us more. And we're like. How many do you want and literally like that euphoric entrepreneurial. We went on six months. Phase of five guys in india where sending him spreadsheets. And there's no automation. There's no bulk up lozano. Ep is you had to put every add on one into facebook so these guys uploading the ads and we're just going crazy realizing that we're so early to this facebook thing generating massive margins and as we looked at the two thousand ten were run rating in the millions of you bet Like fifteen months in and we call from facebook and actually is even more specific than that. We had gone woman who is our account manager. She had worked in performance marketing and facebook at hired her and she literally got her assignment changed at facebook from account manager for random companies like ambush to one of the first two or three people on the partnerships. Api team so she calls. He goes guys. Why are you doing this. Lead gen stuff. Facebook is going to be big. I can help you guys. Get one of the first companies. Get the access to our. Api take all this manuals off you've done and build a software and go build software l. People run facebook ads anywhere and so we had to go through the whole application process and pitched our product and how he would automated and audiences and all this stuff and then ultimately got that approval in early twenty eleven went to work building that software and just a fast. The story a little bit. We built software. We tried to sell the software. And everyone like you want me to do with the software. Like i don't to run facebook marketing. And so they said can you did services and we said oh yeah sure services in keeping my. We had no intention of being an ad agency or getting that world but our customers want it services were bootstrap right our customers our investors assure you want services gets we look at each other. How do we build services and we go. Well we goldman's access services like let's do what they do like. Remember how we used to do recruiting. We went just recruited from the top schools wherever we could get top talent funny because our talents been kind of a secret weapon for us. But we've recruited amazing talent will train them on how to do this from the ground up. We taught ourselves so. We don't need an expert teasing this and that kind of set the wheels in motion to going from whatever that scale was to buy twenty fifteen having probably three or four hundred million and add span and a lot of it was a lot of right place right time but our clients ended up. Being twenty. eleven are vintage was like uber. Dollar shave club supercell which makes clash of clans one of the most talented apps. Hello lou apron. I mean just the who's who because all of those guys at that same time were looking for customer acquisition help and facebook become the first thing they did so we just scale this kind of massive thing and then in two thousand fifteen we sold a minority investment to this awesome company called ventures. Who really taught us to expand our thinking and if we are really great at this performance marketing thing maybe we should be getting equity shares in the businesses rev shares. Like how do we use this platform to start to build and scale businesses from there. We've done some emanate. We continue to have a big marketing services business and also invest in buying different things. Well it's a perfect setup because you've been doing this for ten years now and only have you been doing it a long time but it happens to be the period of time that this has become an enormous thing couple years ago. I think it was two. Ma that said some experts senator venture dollars for just going to be spent on customer acquisition through facebook and google and this is just a key place to win and get customers these days and i've never had a conversation on the podcast about performance marketing. So if we put ourselves in today's land in we'll probably wanna talk about some of the history because it's important to know how we got to here. I'm gonna pretend that. I'm a new company coming to you. Let's say a perspective client. I've got something to sell and really have you walk us through how you would approach a new client. Educate them on whether or not this kind of advertising. Marketing is for them. So when you. And i first met you talk me through this really interesting. Framing that before we get to any of that. The the spend the paybacks. Ltv's all this kind of stuff. You really have to start at a far more basic level with the who what where when why of the business. The revenue event itself. So maybe you could begin their. You're talking to a new company. How should they be thinking about this. As a way to grow their business at the most basic level yeah absolutely. And i think there's probably three or four categories to start with and then gain dive into each of them but this is concept. We caught the revenue of andrew. The economics of the marketing. That i always say gotta start there and part of that is because most of the biggest mistake i see. Most companies make a start talking about spending money on facebook our marketing before. They've understood the economics of their business itself. Come back that the second one is kind of the strategy point which is the who. What when where how the third one is thinking about actual call channel strategy channels is who are you trying to reach. What are you saying to them via created testing. All those things they tie together and the last one is people. The actual organizational discipline. Which as you mentioned is the relatively new discipline in the world but backing up we always say start with the revenue event. And what you find is that every business theoretically has a revenue event. They have a time when the cash register rings as we like to say. That is a point when you go backwards. You start to think about marketing strategy. When you go forward you think about retention and upsell and all these other things and so. Let's talk about a couple of examples right. If you're a supercell clash of clans. The revenue event is the first time someone gets the point where they're like. I want some gold coins. Because i wanna go faster in the game right. If you're university of phoenix. The revenue event is when someone writes her. I wish injects. And then in typical ecommerce or subscription transactions. Someone comes to website. They put their credit card in and they start paying you every month for that so this is a three different examples with different revenue events. But they all have different velocities and connection to the marketing cycle of it right. So in the case of clash of clans. you'll get a facebook ad. you click. Install the funnels very short right and then a lot of it is you get into the game and then how did the mechanics work to get you to pay something. If you don't let them play enough they won't buy it but if you get them play just enough but the mechanics of tying that impression then to that monetization event for example something we found would be when you actually talked about the level or you. Prep to the customer for how they're gonna get the gold coin opportunity that actually improved the entirety of that song so entire economic shifted up enough versus traditional which is like play. Now play free. Gets you a lot of people in the front. But then maybe not doesn't monetize so much on the back a very short funnel and you can do a lot of testing throughout it very fast contrast university of phoenix or mortgage businesses. Ernie's others someone's an ad and it's usually a very soft add like do you want to have a higher income or do you wanna think about buying new housing refinancing. Okay click here. You click then you go to a website where you redo some stuff. Then you fill out a lead form and that leave formed routed to a call center then somebody calls you from anywhere. From a week to ninety days i mean typically a maturation of leads ninety eight process. And then you enroll. And then by the way there's even a funnel event between enrollment and start because they lose twenty percent of the people who enrolled they don't ever start so the the rev there's a totally different animal that one that has to be optimized considerably throughout different phases and ecommerce. It's slightly different. It's like in between those two you and that to me is the starting point because you don't understand the economics and oftentimes a good example of. Hey i want to figure out my facebook strategy. i'll go tell me about. How does your funnel convert what facebook strategize cnn. I said yeah face will happily spend your money and you may be originally back to my story. I just told we didn't understand. The funnel was an issue. We just buy some edwards everyone says arbitrage keywords and then we started spending money and realize it had nothing to do with the keywords. We were buying it everything to do with that landing page. Were sending people to and so. That's a small example but generally understanding that and then of course the next step of any of these things is retention and understanding the economics of when someone does pay revenue event. How often do they pay you. And i oftentimes. We'll tell early. Startups be highly conservative with your payback periods. And the real. The best pro by giving us like try to actually get a negative working capital models. Try to actually charge enough money on the acquisition that you'll make a profit because other place we see people blow themselves up all the time. We've seen legitimately billion dollar gaming. Go out of business. Because they have missed projecting their lifetime value and then it actually came to roost. The income statement and they. They didn't have money like they ran out of money. So we say be very conservative. Focus more on payback than lifetime. But lifetime value has a place. But generally when you're doing this early on it's all about payback period just to clarify a couple of things on the revenue event before we go to the next level down so you've introduced one variable which is really interesting. The sort of time between original impression and the revenue event itself so my first question is what does that cause you to do differently in your job. Whether that's creative or number of times you touch somebody you're like. What does that variable do downstream for the strategy of marketing. And then once we answer that. I also am curious other other variables other than time between impression and revenue event. That you think are especially important to second one. The first one you know there's a really a bunch of a variety of different ways it impacts the business. I mean one thing is just knowing that it's a funny one right like some people go no i. Hey i just ran facebook. And i don't have any customers and you're like well. You know it buying a mattress. Is we work with mattress. It's very different. Someone takes their time to figure that out versus downloading mobile app at the cycles. Just important understand and run your business on a cadence as it relates to that the second thing is most important is in relates that is data feedback loop realistically. You can't optimize a campaign in a ninety a velocity period in a week or two so the timing matters a lot the other variables that are related to that. There's a bunch of them so number of steps right again in the example. This is less about time and more about how many things have to happen. How much friction occurs. Before i make money and the fewer number of steps the easier it is to connect and optimize them. You think about the long funnel of online education and mortgage. I mean we've seen situations where gosh the leads are good. They're coming in with. The sales team takes a week to call them. And guess what it's too late. Those people have already made that spontaneous decision. They decided they enrolled with another school. Called them faster. And if you ever want experience experiences goto mortgage going online education. Fill out your information and we joked about the time your hand moves from the time you hit center they your phone will be ringing. And because the most optimized companies know that matters a lot because in that moment you have that intention so the more steps you have in the funnel the more points of failure the more points of optimization it goes both ways by the way just to be clear like a gaming company can only be so much better than another gaming company along funnel can get significantly better. I mean they can build massive advantage. And when you think about differentiation building unfair differentiation. We tell people like ambushes one of the best facebook marketing firms in the world. And we're probably ten to fifteen percent better right and at times we been forty fifty percent better over time. It's gotten less because facebook's gotten easier but if you get really good at the funnel and the economics and everything that happens after that you can become one hundred percent better. Two hundred percent better length allows for that. Let me try to summarize this back to. You is really interesting so on the one hand the value of performance marketing especially where you can attribute successor not is highest when you can integrate a lot. Which means low pay backward negative working capital so instant payback short time between impression and revenue event and relatively few steps. So that's that's all great but that the cost of that is that it's more competitive and less from for optimizations so there's pros and cons to both. It's not like a spectrum from good to bat last variable by the way related to this kind of we talked about time. We talk about number of against optimize. Is i would say his economics of the revenue events. Remember when someone pays for an online education. Usc teaching. That's like a sixty or seventy thousand dollar purchase when someone buys gold and clash of clans. It's like a ten dollar purchase. Although one funny story is this is a little inside baseball. There was a guy in the uae who was spending a million dollars. A month on clash of clans. True story so that guy aside like generally speaking these are smaller dollar amounts and so the economics are what then allow you in the marketing front while i'll talk to companies and say you know i sell ten dollars megabit. My average order value is fifteen bucks. I'm going to start rubbing on facebook. And i cringe and i go. I don't know because facebook especially as a marketplace. This is an interesting split between facebook and google facebook as marketplace's ultimately a cost per impression. Game that you're competing with everyone and so lower ayovi lower economics unless they make up for it with volume and velocity. They end up having a tough time competing in that marketplace against people selling mattresses or leads universities or anything else google on the other hand every single marketplace of mughal with key. Words is elegant. You could plotted on a chart right where you say. Well what's the cost of the product. What's the cost. click. And it's pretty linear so an auto keyword or the. The one everyone talks about. Is that form of cancer. Mesothelioma as a hundred or two hundred dollar cost per click because one good customer there is millions of dollars whereas again mascara probably twenty five cents a click and you're only competing with other people selling mascara but the idea there is understand the economics of within that revenue event tells you how much you can obviously put into it and how much waste you concur and take and so to add to your model if i could find something fast with short funnel iterations but very expensive or a high value to the customer. That's where things become really. You know you get a really interesting businesses. And like the reason clash of clans clash of clans is their games are so compelling and dictate or whatever and they monetize so well that when we worked with them we had other gaming companies and we would just go man there. Economics are just. This is the easiest company to do marketing for. Just they make so much more money for every install that we generate that easy to do marketing for them. I think it's a good bridge into the second stage of this year. We've got the defined revenue event. That's really interesting variables to understand. Exactly what's going on around revenue event. And how that might impact you think about marketing. What then is the importance of the understanding that the dimensions will call it of the business and the offering the who what where when why and as you walk new companies that you're meeting through this framework. What are you trying to accomplish. What i like about it is that. It's super simple and super intuitive. Who are you selling to. what are you selling to. Where do you wanna read some wendy. You wanna reach some. How do you want to but then it can actually like a fractional it can actually get very very nuance and it can literally be the way you do like a detailed facebook ad campaign so it layers all the way to who. I'm gonna target moms between the ages of thirty and thirty two. Oh wow or. I'm gonna who the people who search this keyword so you can bring all the way down to this highly granular level. What can effectively be a conversation around creative strategy. What are you saying to these. People are gonna save you money. Are you telling them it will be make their life better. Are you going to show them of jumping cats. Like what exactly are you doing. What are you showing. What message are you showing to them. Whereas a channel strategy or what channels you wanna use when could be some businesses. When weather is bad they pick up or weekends results. These jokes like dating customer. acquisition campaigns. Do terrible on. Fridays and saturdays. Because you think you're gonna get lucky. And then they crush. On sundays and mondays by other category that falls into that is jobs right and friday saturday or like. I'm not thinking about my job and sunday monday. Or if you go to job and that's when the customer acquisition campaigns and there's all kinds of different little when nuances of understanding your business and how a customer buys in your business big mistake people make. Is they try to do everything at once. And so the other reason. It's important to do this as because he's okay. Yes we can identify all the key words you could ever buy but we gotta start with one thing. We gotta make one thing were. Major one thing works economically sound. And it's almost like any investment strategy. Anyone wanted right. Which is like. I gotta put. Some capital in some capital has to come out and if i can get that producing regularly without a lot of energy and effort then i can go on to another channel or another set of strategies are another thing. I'll see a lot of companies. I'll come in and they're going well. I've got this much. Seo going i've got a little bit of surge. I've got some facebook. The whole thing is really small and none of. It's really working all that well. And that's a very common thing that will run into the market if that's a mistake of action. What are the most common mistakes of understanding meaning when you visit with new companies. What do they tend to understand the least well about themselves as you walk through this list of questions. You'll meet a lot of business. People entrepreneurs who they spent a year developing their product. I've developed the fanciest mattress. It has a i built into it. It can do all of these various. Hey can you give me an agent z and. I'm just going to hand them. This thing to do the marketing with it. And i gotta go hold on a second. You spent a year plus developing this product. And you're gonna hand it to some seven person company where you're going to be their smallest client to star or they're gonna give it to the endurance endurance and you think they're going to crack your marketing for you. It's like an incentives problem. And what i tell them. As i say i want you to spend at least half as much time as you spend developing your product on developing your unique marketing strategy and to me in the beginning it's a founder level thing it doesn't mean the founder has execute every little campaign. And my my little rule of thumb is. Somebody taught me. This too is is ninety days with more than fifty percent of your time and focus for the founder to crack any channel. One channel one channel. So if you want facebook working ninety days fifty percent of your time and that energy until again just like any business you can dial up. Spend every week if you want and you continue to get the return that you expect you'll get and consistently get that and then typically i tell people again then someone spends you know fifty one hundred k. A month on facebook and they just got to diversify. And i'm like no you don't need to diversify i tell people until you're spending a million dollars a month on facebook then talk about diversification. There are ceilings like anything like there are various ceilings. Plateaus you run into in the path from spending a hundred grand a month on facebook to a million dollars a month and oftentimes people will unknowingly plateau themselves because again they get frayed in their focus. We've mentioned facebook. And google a lot and obviously ambush itself in many ways was like at the right time to be learning from in riding the rise of these to add platforms which now dominate performance marketing on what their combined market share is. But it's crazy. High eighty percent eighty percent and so before we come back to the present again. I just want to understand a couple chapters of the twenty ten to twenty twenty period. Maybe by asking what have been the major changes to this ecosystem maybe can be defined as like an push. Start doing things differently in a new chapter. Help us understand that evolution. What are the major changes that have happened. Walk us through this. Yes sure let me actually all back up a little bit even further think. Most people don't even understand the history of marketing advertising. And i didn't either by the way many many years and before i actually asked myself that question and tried to understand it. There's some famous quote. I don't know who said it where it's like. The only way to make money is to sell something or help somebody else something in the marketing advertising business is one where you're helping people sell something and it's an interesting trade. Where the platform do you think about even back to newspapers. Maybe that's start there then. Radio then television. They had attention and they were trying to sell attention in units of attention. They're the sellers of attention and their buyers are trying to buy revenue effectively. They're trying to buy other. They're trying to buy sales in some capacity. And so you know you had newspapers which classifieds were pretty direct response. People would open them up. Look at things. I'm going to call in and even white pages was a form of advertising. That was pretty direct response oriented and television. You know early on. There's actually a funny story about png where they would launch television in cities and they would just see their local stores have massive sales and so even television started more dr radio but over time they say when dr gets big enough it just becomes brand marketing Enough people over time we we saw these things really developed two separate disciplines for the most brand marketing was. Tell your story do it big. It has to be millions of dollars and up until the internet said essentially. Most of marketing was either huge dollars. Massive brand or even if you wanted to do direct response it was like infomercials or it was like call centers. It was still stuff that cost you a lot of money to do something. Have a very simple definition for direct. Response versus brand is the simple as direct responses. They go buy it right then and brand is just like they learn about the company or become aware of it. Typically if you think about the marketing funnel right. There's the asia's awareness interest desire action. There's like ten different versions of bad right directly the you can't sell only until someone's aware of it. You can't sell something until someone is interested in. Enzo typically brand is out of his top of the funnel. I'm gonna drive brought awareness and believe that if enough people know coexist exists or have a high affinity for it. They go to the grocery store and they'll go by when buy it direct response. Typically you can either think of it as cutting through the funnel so in one moment you become aware and desire like you see this. You know little contraption that goes into your orange juice you don't have to open it and rip open the saying that classic friends you know example or some random thing on infomercial or you can think of it as they just circumvent the tops parts of the funnel and immediately drive to action so the marketing is built and i think of it is revenue based marketing. Which is the way. I measure success in it is does generate revenue for me whereas i think of it is at least in the short term that do i get more awareness and again. The disciplines are quite different brand marketing tends to be. It's bigger they be measured. I would call it softer metrics. They might say something different about that but like soffer things. They're not. There's less accountability in that world is a little bit more like madmen and direct marketing. Is this like more hardcore thing. But bill drake market used to be pretty hard before the internet came along and the first step of of online marketing was display marketing so it was like banners and someone went along and they sold all the brand markers they like. Get your in front tons of eyeballs. And that's kind start iterating. And there's a little bit of direct response pre google but not much right. And then google launches the idea that i'm going to search keyword and then you're gonna show me a relevant ad and that was the first game changer in direct marketing and the biggest game changer was a credit card up similar to like. Aws now and all these other things. I can put a small credit card up. I don't have to talk to a person. And i can start getting highly relevant customers to my product and that was from two thousand and whatever three or four till we even we start in two thousand and ten. I mean google wasn't face but there was nothing else right and it was incredibly dominant and it affected almost every vertical and it was just this amazing kind of form of marketing. But it's very different than anything that existed before it and then facebook came along and honestly facebook in the early days with the exception of people like us were really kind of gaming their systems by targeting things very specifically like substitute teachers and showing the ad to forty thousands teachers. The early days of facebook were kinda challenging man. people thought. Hey this may amount work. The ads run that right rail. They weren't in the news feed and what really changed. The game for facebook was not surprisingly a bunch of who what when where warehouse stuff right. so the what. First of all one of the most important things was. They started putting ads in the news. Feed the double. What was they started putting ads on mobile in the news. Feed because remember. They didn't launch their mobile app. Until i think right around the time they went public and then the who became less about their targeting tools and more about their news feed algorithm figuring out what a person wants and serving it up to them to go back to your original question. Like what's the last ten years. Look like it started with facebook. Being kind of this little offshoot of google it could get you some. Dr for certain categories daily deals stuff like the education stuff. We're doing gaming worked for a few categories news feed as got into the news feed mobile launched. And then you started having like sometimes we will call them custom audiences but really. It's the facebook algorithm starting to use the data. They had about a person to serve them much more relevant experience and that just led to this dynamic where almost any marketer could make it work on facebook and make it work at scale and then most crazy thing about facebook is it somehow has become a brand and a dr vehicle so you can still spend the fifty bucks to get going but in order to make it work. You know what google does not do. Google doesn't get a lot of impressions. You search mascara. You're going to see if you add. You're gonna buy cuts that funnel right you just go to the bottom of it facebook against campaign on facebook. Let's just say as ten million ad impressions of which one percent of the people click so one hundred thousand people of which two percent of those people by so you sell thousand subscriptions or whatever you're selling that's a great campaign what you get is the benefit of the customers and the ten million impressions and that i think is one of the many factors that has led to this rise of dc in all these other things now other channels have come about and you know. They've kind of drafted off facebook. You've got snapchat you've got interest amazon is an interesting one for ecommerce in particular amazon will probably be the third biggest because of scale and the big reason for that and the other one's reason pinterest and snapchat aren't quite there yet. Is we call it. The holy triangle performance marketing. The holy triangle is scale so volume of customers right cost and quality or revenue. And the reason that's important and this was a really important nuance. We learned early on as in most industries. You have a volume discount. I buy a thousand desks. You're gonna give me a cheaper dusk in media because there's space and there's less space as more people by that's one reason for it. There's a volume premium. Other reason for it is because people aren't optimizing to unit margin there optimizing the total profit so in other words. If i came to you. And i said i can get you thousand customers at a fifty percent margin or i can get you two thousand and a forty percent margin. Which will you take. You'll take the second one because your total profit goes up. So everyone is optimizing for those three variables and the scale of facebook and google and certain other channels like television are so much larger than these other ones that oftentimes we will do it with partners where we say. It's better to figure out a new way of a fishing inside of facebook than to spend any time on pinterest as an example zooming back forward today really interesting history lesson progression. What you think is the most important way for a new advertiser someone. That's doing this for the first time to think about the message itself so we really haven't talked about that we've talked about lots of other aspects of this but just around the actual message substitute teacher. Example was the one that you gave of what you're serving up. What have you learned about that. And i loved your quote that you don't get outspent you just get out tested in in this field so talk us through the role of data and creative and innovation and experimentation when it comes to what you're actually telling perspective customers. There's definitely room for. What is your brand stand for is an irreverent brand. Is it a serious brand makes sense to think about who you wanna be a high level and then as you go into direct response marketing again because it's cheap because it's fast because of all those things you often have also say no and again. It's it's another form of customers interested city like i don't know what's going to resonate with people and i imagine examples like do they care that it's cheap do they care that it's fancy and so the role of testing experimentation is everything the actual answer to continually compounding better economics and any marketing campaign is continued form of iterative. It's like the volume of test. You can actually run meaningfully in any given time period and then obviously it's not just running a bunch of its learning every time you run a test and so you start to learn very quickly. What affects what the most. So you'll see stuff like does add copy have major fact not as major is the creative and the format like video versus. Non video has a major impact on facebook in particular the headlines matter a lot more verse you learn these different pieces of it and then the each become individual variables at you're constantly testing and iterating against the sped goes back to human psychology urgency. There's that famous book influence. And i kid you not. We have people read it. When you get to a certain level at ambushers read this book. Do you have urgency diaz. Scarcity is kind of a deal. You're getting from someone. And how does that flow into the ad. Copy that you're writing and the message that you're sending you a customer and then there'll be different strategies. People have against those specific influence variables or other types of variables. What competitors are doing and then it becomes kind of like a product management. You just have a backlog of things you want to test. How big do you think they're going to be. And you just run through testing them on a frequent basis. This may be too specific question. But i'm just interested in what you've learned about conversion in general i. I don't even know what the expected. Conversion would be serving someone a facebook ad or maybe even going all the way back to the closer to the revenue event on a good website. Like let's say you get someone to the website on a good website like what is really good. Conversion mean what is really bad conversion meaning then ditto for serving them some piece of performance marketing in one of these channels. What's really good. What's really bad. Give us some guardrails there. I think the first thing you have to think about is what is the person what action are they taking right so. Let me give you a huge range. Really bad is probably sub. One percent really good is like above ten percent now. It depends on what you're asking them to do. If you're asking me to fill out a form that i'm going to get paid on. Because i'm selling a lead to university our mortgage business or something then like those. Conversion rates tend to be in the like five to six percent range but the ultimate conversion rate which is the revenue event is far lower than that because on the other side. I'm selling that. Somebody else looks at that as media. They're buying they look at those there going to buy a thousand leads from all these lead people and then two percent of them are going to become students for me and typically e commerce business we would say depending on the average order value. And all that stuff. It's like one and a half to three percent. So if you're better than three percent that's pretty good and conversion the other thing relating back to the revenue event funneling was like this metric that we talk about called. Apm which is acquisitions sales per thousand impressions. you're serving on various channels and what that does is it. Collapses the clicks the conversions into one metric. And you in some ways you want a manager that way right. 'cause the i'll tell you another funny at iran. When i was twenty five building the business was go to class naked and online universities. Right like a woman holding yourself. There was no nudity but she was naked clearly and you know she was like protecting and dude best. Click through rate in the history of facebook. Forty percent click through rate zero conversions right and facebook. Bandit after after. Like i spent at fifty five hundred dollars on a bandit that this doesn't fit within our content guidelines or whatever it was like the early days of click bait didn't even know what i was doing. But that's why you want to manage. Click through and conversion together as part of your question on what makes good conversion is is a consistent experience. Do i get what. I expect when i click on the ad. Is there something driving me to actually purchase this as clear as to what i'm buying it so you can be really. You can sell really hard up front with the ad and its own lands on the conversion beijing in the products. Five hundred dollars to buy. You're gonna lose everyone ryan so you have to mix those together measure them together and that ultimately against a little bit of our playbook and secrets if you think about. Facebook is a competitive auction of cpm's when the price goes up of cpm that's not facebook. That's the market saying that. The impressions are more valuable and what that means is they're getting more. Roi for every impression they're serving because they're willing to pay more for them so if you're not able to consistently out beat that market your cac is going to go up. Because the baseline cost is going to go up. And so a calming will see with companies that a little bit further along is they'll go michael twenty five bucks for the last six months and now it's forty bucks. It's all cpm's facebook's getting more expensive and we go show us the creative distribution between now and then you're spending forty percent of your money on the same creative for the last six months ago. Yeah but that's our winter. That's the thing that led us to the promised land and you go. Yeah of course like if you're not getting better yield out of that real estate when other analogy i'll give farmland analogies like it's a piece. It's an acre of land. And if you don't get better at farming it to get more crop out of consistently eventually you're you're yielding your margin's gonna get prince exact same thing on facebook. It's fascinating that there's sort of an interplay between arbitrage back to your goldman days what i'll call alpha and beta. I'd love you to walk us through that idea. So the way i would think about alpha here is like being early the facebook. And you're getting those that moment where you see the ten dollars. You couldn't even believe it. And that sort of is like an alpha one is disalvo still exist. I guess it probably always does to some extent. Is it worth looking for is another interesting question. And what is beta mean. Because obviously people wouldn't keep spending in these channels there wasn't working in an aggregate it has produced results. Yeah i think of it as a little different we love you all these finance analogies of the stuff like i actually think what we did in the early days of facebook was arbitrage. I think we were early. To an asset class that was like illiquid people didn't realize the value of it we did earlier. And gosh dude. We made tons of money doing it right. And then the bait of the market is like. Oh well everyone does certain things in a certain way they all target a certain way. And if you just look at the beta margin i can spend twenty dollars on an impression. I can get this many lakes as many conversions. Actually the average is the betas zero point seven percent on average across all of our stuff. And let's say a percent half conversion rate. You could probably build a business. It's probably going to be pretty commoditised low margin. You'll still make money right. I mean people doing that. The average and that we think of alpha's anything you can do to beat those two numbers because it means that your tractor on the same plot of land is able to pull out way more crop than anybody else's and you gotta keep tuning that thing to make better and better over time and it kind of goes back to again just to tie up some loose ends like if you're if you're is massive and long and has tons of end points dude you can develop them. You can get a lot of alpha that thing. The story of quicken loans and dan gilbert is all hearsay. But like what i've heard is the guy practically invented digital direct market but as a mortgage business and he was going to the point where he would figure out where you're calling from you're from kentucky and he would route your call to a broker who was a guy from kentucky right talk about alpha like now you're gonna you're gonna get your mortgage from that guy like guy down the street. Even though he's sitting in detroit in the call center so you just think about the size of those funnels are significantly more alpha creation abilities. Where essentially outperforming the market in the same function in the case of quicken loans. I mean legitimately probably built into one of the largest crazy business right super profitable to commodity fundamentally commodity business and yet they're so much better at this and it's all that point from serving ad impressions to the time someone signs at the revenue event. You sent me a perfectly for the third category. Which is the people people plus the way that organizations manage this function. Pure outsourcing as the example. You gave earlier a build a mattress for a year. Then just hire someone else to solve this problem. I think your observation is and correct me. If i'm wrong that the best companies don't do that they use firms like an push as fuel not as the source of the fire. And so i'd love to hear what you've learned about the best marketing organizations is the leadership. Look like when is it installed. In the company's life cycle what are the best groups. Look like like what are the best performing teams and people inside of the companies that you've worked with. Yeah it's a great question. There stages that we see that different things tend to happen at. I think make sense and a lot of our point of view. I think there's this is zero to five million in revenue businesses and typically one of the founders has to own this and they have to get intimate enough to understand the economics of it and why it's working why it's not and we tend to recommend either you find a former goldman percent or someone from finance. Teach them how to do this or find consultant. But like you have to ingest that dna early on in the organization to understand build out in you mentioned as we say third parties they're good pouring kerosene on the fire. They're not very at rubbing sticks together right and you don for noor has to rub those sticks together and then once you're a place where you're kind of consistently spending say you know hundred two hundred thousand dollars a month. It's five ten million in revenue and you're looking to scale that and what you're running into is issues with. I don't have enough creative production and you know what those issues are. It's not like i don't know how to scale from here. It's like if. I just had more creative testing if i had more people fingers to keys building more ads. I could do this. That's when oftentimes. Hey that's a good time to take a third party and you'll typically see people go from spending a million dollars a year to like five to ten million a year in the second phase and it's still typically pretty hasley they'll have forty percents still going to want asset and they're just they're trying to get growing scaling and then they go into the like ten million's eight years of the twenty five thirty million dollar business and that's typically when an ambush will come in and we'll say hey you can take your ten of thirty to forty or fifty right. And but you can't do it the way you're doing it you have to be rigorous by your testing if analyze every single ad all the way to the end even think about retention as it relates to specific ads out that entire data loop. You want to be very methodical about your testing and experimenting you have a roadmap you want to build all these things. You need fulltime creative fulltime this fulltime that and then scale business took thirty forty million and performance marketing and baby one hundred million dollar business and then i think oftentimes we'll see an all circle back and talk about the team and stuff in a second but we'll say oh not now you're like a real brand now actually you need scale and now you can go find yourself the of blah blah blah and. Yeah maybe you should have a field good billboard and a you know do these things that are going to really get you on the map and more serious way and your marketing budgets going ahead to one hundred and your top lines and had to three hundred or more and you wanna be thinking about stuff like attribution ran messaging in really the next level with the strong performance marketing engine at the core of it and a strong funnel and analytics. And all the things we've talked about already today at the most core around what you're doing so that's progression that we would say you know i think around that. Thirty or forty million. If you're serious about building your own performance marketing organization. I think throughout that entire journey having a really strong kind of head of growth diapers some even with third parties or not. I think if you're serious about building a performance marketing organization. I think you start building it you know in. You're sort of at the end of the ambush life cycle twenty or thirty million in spend often. I say series because we was a little bit of our own biases but a lot of organizations that do it because their investors want them to do it because they want to tell a story and then literally in two years. They'll call us back and say oh. gosh like. this isn't working. I need more help. And i think the ones the amazons of the world some of the best companies build these organizations like critical functions in their being. Those are really strong. But there's a lot of businesses that sort of do it to check the box. What does it look like. I think early days ahead of growth and maybe consultant someone to analyze numbers and data. Someone who can do the creative stuff and maybe a web developer who can make experimentation vassar one thing that we always recommend like engineering and product you have to excrete some kind of a sidecar for marketing. Otherwise their stuff gets deprioritize underneath the core product. Stuff and you're not able to make marketing go as fast and early team could just be like ahead of growth. Fifty percent and designer fifty percent analysts type person at scale we think great organization is like you've got a cmo. Ideally is strategic. Who can look forward. Who can tell the story. You can do all those things but also is pretty analytical and can think about numbers are and if they're not they certainly have surrounded themselves with another person who's highly analytical at a senior level. Drive those things leadership then breaks down into. There's might be stuff like pr comms or other things that but really the head of growth. Is this person who we think of him as they look like a vpn investment bank engagement manager at mckinsey type plays. They're very strategic. They're very rigorous. They're very comfortable with numbers and they really can understand how the pieces fit together to be able to build and scale this thing and they have a system in a paradigm that they bill and then underneath them depends a little bit on the business. Sometimes people do it by the major product lines by channels but there's some form of the actual marketing that's going out and then surrounding. Those groups is like designers. Web developers doers of the actual marketing. So there's like these centers of we called them marketing leads or whatever growth martin leads but they're they're really doing the day to day of that stuff but they're surrounded by the people are helping them. Execute those things now scaled organization. We've talked about how this is a new discipline. And i think that's just an important thing to for people to recognize. I think would you tend to see in the world as you see. There's a lot of a call them. Hand wavy brand marketing. And it doesn't mean to be negative towards them. It's just. They're not the people who are gonna run rigorous analytical facebook campaigns their launching. Think of great ideas. There's a lot of hustlers in this space. Which again. I don't mean negatively i mean they're freaking creative people come up with good ideas but they're not particularly rigorous and now there's like we call the ambush breed that every phase of growth adored ashes. Run by former. Am i and to give you a perspective right. And they're the people who combined a little bit of hustle but really they're analytically rigorous people who get into experimenting testing orient asian. And that's kind of what we think. Look for but just for the founders and everyone out there. Those people are not. That's not engineer. Even product manager. The world is not as developed yet in that talent orientation so those things exist and so part of his you'd have to be willing to create that recognize. That's what's out there today and people need to learn to get there. Is there anything else that we haven't covered on the present state of opportunities for marketing. That you find interesting. Obviously i know you focus on direct response. Maybe facebook even more specifically. What else is interesting. We haven't talked about aggregations like a nerdwallet or thumb tack. I really don't know much about them. I'd be curious what you think about places like that or you mentioned the original stuff. Newspapers radio television. There's lots of places that we haven't talked about that aggregate attention walk us through the rest of this sort of like succeed by selling something for somebody else. Other attention aggregate. Here's how do you think about them. How do you advise companies a couple of interesting trends. I'd highlight one is always experiment with people always go. I tried a. Have you ever tried this. I tried that didn't work. We try to train people as last time. I tried that when i did it. It didn't work. It's back in the bottom of the pipeline. I'm gonna try. And i'll give you a specific example. Which is kinda crazy snapchat when it first came out was not great in terms of their marketing and then instagram stole stories. Instagram made stories creative work and made that thing work. Now someone this year literally of ambush. i heard. This is like a bullet point somewhere. Hey we we took what we were doing. Instagram tried on snapchat stories and it's crushing it. Go wild snapped fastest growing channel for us right now as an organization right and so constantly test and experiment everything and there's also we didn't talk about product channel fit which i think is another important thing which is some products and some things are just better for certain channels than others gaming tends to work on the snap chats and even facebook in the early days they tend to be leading platform online education surge. Insurance and search is amazing. I'm looking for auto insurance. I want to buy it and so thinking about product channel. Sit is a really important concept. Broadly are there any other general lessons there that you think people should ask themselves about that or even channel by channel. What sorts of things you think about. I think the easiest hack for it honestly is just look at what people are doing. Where and what's working and by the way that could be a reason to do it. There can also be reason to not try to sell auto insurance on google today. You're gonna get crushed so maybe you gotta figure out a different who what when where for facebook. The other big thing is there's a tech affiliation of old world channels to this company called pebble post and they let you run a direct mail campaign like it's a facebook campaign you can log in. You can make your creative. You can decide what kind of addresses you wanna send it to ship it out for you on your behalf and you'll start to get customers from an old track it and i'll tell you what's going on with it and that's happening everywhere. It's happening television with the tv. So the tech advocate. If you learn how to run a campaign on facebook or google you can probably port that capability in mindset over to a lot of these new channels as it goes. And then you know the other thing that we've heard and seen a lot in the marketplace is combining channels in smart ways. We had a. We had a partner who they ran. They took the country and they split it into thirds and for one third. They ran radio one third. They ran direct mail and third third. They ran both an individually. The economics did not make sense for either of the first two when they combine them the economics were like a six sacks ryan you just maybe it's it's a slightly older dama. They're going after it's like. Oh they heard on the radio then. It's how many impressions did you serve to the person before they did it but i think the biggest underpinning of all this stuff is very open minded be very curious and constantly experiment and never tell yourself that did not work. We got we would change the language to say we were not able to make that work. I didn't work for us right because the thing works is somebody's spending money on in doing it. And so i think for all those other channels i think. Dr tv is going to be compelling you again the the big things that matter reach. Can you get to a lot of people at scale. Can you measure effectively reason. Dart compelling because of that vanity url. So the fact that you can say the same thing with podcast you can really get to the specifics of that. And then can you build kind of analytical and testing framework on top of it and from those things then honestly any channel can work like many things right at work for everyone all of the time. Do you have a single company. Example from somebody that you've worked with across ambushes history that you think is the most interesting sort of end to end experience whether that be because of how they did it the lead to success or failure or you pick the reason. Why was there an end to end. Customer of yours that you learned a tremendous amount from. We worked with uber for a long time and did a lot of driver acquisition for them and that was a fascinating. It made me realize how much of our business was bottom of the funnel and inactivation versus traditional marketing. They're huge customer of ours was a huge badge of honor right to work with them and i get an uber. I got into a year about huber and think. Oh my cousin my nephew. My uncle my best friend. And i was like what we're spending tens of millions of dollars on this and then i realized that s in wrong question. Then i started asking the same question. Did you hear about us same answer. That's where'd you sign up for uber. Oh facebook oh. I did that on facebook and i was like yes. That's an ad from us. And i think what they did. That was really well was uber. Because of the immense talon and rigour there we talk about along funnel and building an advantage in that funnel they would test in measure and every little piece of it you know. Where did that come from. What city was running in. It was a better text message. They sign up or better to call them okay. How do we think about the funnel drivers insane right. I you have to sign up. Then they contact you then run a background check on you. Then have to get your car checked. Then you have actually start driving and then if you keep you driving and so i think the level of rigor and experimentation at every little piece of that kind of blew our minds right. We were able to connect things like you know amount of driving. The person did or even amount of effective customer demand. They drove because of incremental supply to the specific ad creative that we were running an echo of rigorous. That often brings a an area that we haven't talked about that. I wanna make sure to touch on which is retention marketing. So we've talked. mostly. I think about the ultimate revenue yield on thousand impressions or whatever this combined metric that you think is important at the front end. What about after. You have a customer. So what have you learned there about driving retention about continuing to market to people even after their a customer. What are the best practices from your seat and that you see companies do in this area. I think that my death is much lower in retention. I think what we've seen there learned some of it is the old adage of great product services. People stick around and that matters a lot. I think the best companies sink a lot about the natural orientation of a customer. Everything we've talked about goes back to customers interesting somewhere but they go email someone every day and that's not the natural cadence they need your product or service it spam. If you never email them they're gonna forget you exist. You never interacting with them so the best companies think about. What's the natural interaction. That happens with the customer and they put a little bit of extra possessor fuel against that to keep the person engaging keep them going. The other thing is a go back again. I'm a hammer here. Looking at a nail but like people who segment their customers to understand their customers who never leave you or keep spending more with you every month. How did you acquire those who are they. Let's actually one of the funny examples in the market we see is what's your cac and one and telltale sign of someone who's not yet sophisticated enough they'll go. Oh it's fifty bucks a hold on the sophisticated answer will go. Well we have five. We know our highest quality people people who refer remittance business. We work with the people who have family everywhere they send money every week. Pay three hundred dollars for those guys right and the next level and one hundred for these types these other people will only pay fifteen bucks or because they use us once for transaction. And never come back. You mentioned snapchat is the fastest growing of the platforms. What are the other a pure frontiers in performance marketing. Even if not they're active you have your eye on it as something worth watching and interesting. That's emerging tiktok as an obvious. One reminds me of facebook in the early days. I mean there's going to be something big. They're almost no question in my mind about that. They're very early. And so it's gonna take some time and there's a little bit in this space. We learned it the hard way. A few times of that adage of pioneers get slaughtered and settlers get rich. So there's there's no reason to be the first oftentimes it's actually better to be second third and let somebody else go through all that rigmarole and then come in and just build a better mouse trap in these specific channels. The cc tv or dr tv. I think is going to be a beast like it's gonna be a big big thing. Cutest say more about what those are. I think a lot of people won't be familiar. Yeah so that's when you know you're on hulu hulu self serve ad platform now. And so if you have the add version of hulu in between your episodes of seinfeld or whatever you'll have ads it'll pop up for dc brands or for others at and you can actually upload a video creative it there and pay the way you would run a facebook or rule campaign and because the vanity you are l. will say puji dot com for us hulu. There's actually a really easy ability to tie it back to what you're spending there and we've heard like lots of positive things about it in the marketplace that's a very meaningful frontier. We actually do a lot with this. And it's growing fast and it's big. It's not a channel. So much is a how i guess i would call it in. My little thing is influence or stuff and i think influencers in the top of the first ending. Give us the quick overview there so both size scope how you would attack it or they're interesting businesses like self serve platforms being built so influence or one zero one was. I'm gonna pay someone a fixed fee. They're gonna write an instagram post. And they're gonna say buy my product to a one for influence or was a influence a record bunch of different ads for me. I'm gonna run ads for my handle influence or three. Oh one is. I want to take your handle and i'm gonna run media from us actually a separate voice in the marketplace. It's beyond my own brand. I have some woman from the bachelor or whatever. And she's going to have our own creative talking about great product. Is we apply the prowess of ambushes media rigor and all that till like an ad campaign coming from whoever whatever kelly so-and-so's name and rebel to get massive scale their incremental to what we're doing with the brands and stuff like that but the four. Oh one in five. Oh one is like we've seen some of this in the past with the kylie jenner stuff. I think china is the only place. I go to look when i try to understand this like in china. There's literally entire firms that they recruit influencers influencers have their own product lines and it's all orchestrated by third companies. That are doing this. But it's like shop afyon meets some of the three one influence or stuff where these people are launching their own stores or even temporary stores writer. This live tv shopping stuff. Part of your question is like what exists out there. Will there sas companies that are powering. The recruiting almost like an applicant tracking system. They'll power the routing of them the payment of them that so that's a whole segment. There's three or four companies doing sas stuff their their services businesses that will help you recruit it there. There's talent agencies are now involved in this susan entire ecosystem coming up in and around this. You know they're all mostly micro influencers crazy. Things we learned early on was that there isn't a correlation necessarily with scale and size and ability to actually convert economically and in some ways. There's like moneyball ray where you go. I don't wanna pay snoop dogg's fee or whatever to run campaign from his thing. It's just too expensive and it doesn't back out. But some niche person who you and i have never heard of but fifty thousand people have heard of them they actually are the best economic trade off and by the way. It is all happening on facebook instagram snaps. So it's not like these are channels per se. But they're almost a tactic inside of the channel you asked about nerdwallet inner walls. That's a massive business. It's a really a lot of red. Ventures does is buying those businesses. How does it work. You describe how it works. Sure so generally. Speaking those businesses are trying to help a customer navigate a purchase decision. The what credit card. Do i get for this or if i wanna maximize my points. And typically most of the source of their traffic is non-paid partly because of the way the economics they wanna write really good content build calculators all these tools so that you can come on the site and get value and you're getting picked up through. Seo through organic search which is sort of a fixed investment but no incremental costs every time you come on right and then i'll go into your wallet. I'll read it for a bunch of articles. And then i'll go. Oh yeah this credit card. Based on i have two kids i in the midwest. Whatever that's the right credit card from you. Click through and buy it. And then the credit card companies american express will pay nerdwallet bounty every time they attribute the customer back so it's a form of performance marketing where they start as a stores and exists in almost every vertical and so those businesses. I think if you're a brand in one of those spaces especially early on because they're fixed price and because they already get of customers there are really good place to start because there's no variable cost is almost no risk. If as long as you're economics work on your side of the revenue event think every vertical. You're gonna see versions of that. Let me help. The consumer make a decision and then get paid by the company and google's pretty good about managing that and even customers are pretty smart if they go to something that they have as the so bias. It doesn't make any sense versus the people who keep it pure tend to do better in that realm in aggregate is take all kinds of flavors. Like you'll see some that they really are just editorial articles and they make money on the back end of that. You'll see you mentioned thumb tack where they really want to help the customer from end to end. There's a lot of creativity in that world. At the end of the there was a customer who wants or needs something that has some challenge and there's like businesses who provide it. Yes facebook is this massive non verticalised but has this ability to show i in the right message right time. But then there's so many different onion layers. Of what other ways. Can i serve that customer. Trying to make a purchase decision to allow them to get a win for everybody by the way the customer gets a better experience aggregate or gets paid and the person gets customers generally this categories affiliate has some negative connotations associated with it but generally affiliate will be anywhere from fifteen to twenty five percent of the mix of a scaled. Marketing direct response campaign. Let's take your collective experience and apply it in different way. Which is i always say. I love people that get just an insane amount of reps looking at other businesses through some unique lance. You've a very unique. Lancia walked through that the way in which on the paid side tons of different businesses got so many businesses ambushes worked with over. The years acquired their customers with all of that learning. I'd like to ask you questions as an investor. So let's say tomorrow. Everything related was gone. And you set up a new fund to just be an arms length investor in businesses and. I'm not even going to specify kind of business early stage late. Stage doesn't matter with everything you've learned. What would be that lens like. Walk me through that lens of how you and i'm sure done this to think about businesses as you consider investing in the playoff typically will start would be maybe not surprisingly the economics of the business. And by that i mean. What's the revenue. What's the gross margins. What's the cycle of selling this thing. How challenging is a. It's all these things that happen after the click if you will to try to understand how big of a problem is this for people and economics look like when you get it right. Some of the common lenses what's the actual value prop. Is it a big market the standard stuff but then the next step is okay. What are the economics of this business. And you know. How much does it recur. What are the gross margins associated with it kind of go through that economic thing to understand how challenging will it be for them to get from a person looking at this all the way to actually purchasing this and then what does it look like with successful and if you believe someone could be successful in doing that example bins. I did invest in Smile direct club called candidate. One of the first angel investments made in the journey and i was like. Oh so this is like everyone knows if they have this problem like i know. My teeth are crooked who i like that right. I can build very engaging creative that's gonna catch people's attention to drive up interest in this dynamic. I talked about the numbers in a campaign. Ten million people one percent of them click. It's oftentimes very driven by the psychology of impulse. And okay yeah. I've been meaning to get that done. You don't need to convince me that i have that problem. Okay i'm going to click on that. Oh there's a fun. All while. I gotta go either. Go into a center or actually a home kit. You get really great at that. There's a lot of alpha ability and building that out and then the product is like two gs which is much cheaper than the competitor invisible line all in economics of customer. Acquisition can be fifteen twenty percent. It's very believable. That that's the case. And i'm like yes i get this and it makes sense and then the apm. I think over time can get better and better. In those businesses it can be in every different channel. The other thing. I'll look for it kind of it's a little bit talent. A little bit economics as they already built some of these unique moats and typically whether that shows up by the way is in some insane. Ltv right or some metric where you're like. Wow they're getting five one economics or six to one and you go. Oh wow. They've got this huge. Seo community of two hundred thousand people that are constantly coming in. and yes. i like the can blend down. Their facebook cost dramatically or. Wow their email is really compelling. Oftentimes that stuff will show up economically. But you wanna make sure it's consistent. It's not just. They're really good facebook ad buying because as those things scale. You're gonna wanna see the ability to have multiple things at blend to superior economics over time. It plays well in two directions. One you can spend more on marketing and scale the other one is you can actually put more into your product and actually improve. If you're selling medication or whatever you can get the formula even better you can do other things with it so i'll spend a lot of time on. Is this the best their economics will ever get or to actually think they're already pretty good at this and they haven't even tried. It's like the base base. Vc playbook standard big whatever and then believing that there's a lot of marketing alpha their business part of this too is understanding obviously the teams and how they're going to execute and i think you've really unique viewpoint sort of everything that i've ever talked to you about i think is because in many ways you yourself were bootstrapped business that never had the luxury of millions of dollars in the bank before you produced revenue sometimes for a long time. A lot of cash burning. I want to talk through what that experience has taught you and sort of have you evaluate when it's appropriate to do that building versus the traditional funded variety where he might not make money for a decade or longer as is the case with a lot of the biggest financial outcomes for investments at least in the last ten years so just give us the basics of lessons from bootstrapping. Maybe what it requires the good bad and the ugly and i to. We've in this concept you have of the entrepreneurial execution loop i think this is a really powerful concept that i want to walk through the steps of and all that you decide how to introduce those steps but bootstrapping in the execution loop by to spend some time on one less thing to add on the previous thing and it kinda relates to this question of the way we we point of view and around businesses executives. There's a certain type of executive. There's kind of this funny buffet. Ism right where he says. I want to own investment business. Any idiot can run because eventually an idiot will run it. And there's these incredible franchise like visa right like man. I don't know anyone these. I'm not saying they're bad executives but like that is a fantastic business and there's a lot of command and control in like my reports. I'm gonna make sure my reports do this. And that sort of traditional kind of what you think of his big corporate businesses and then there's this other one which is like i can go to the bone anytime i want. 'cause i can dive in deep businesses like amazon like the senior people. There could get into the innards of these things. You and i are talking about any day of the week if they wanted to. I met the president of disney plus. And i kid you not the guys. Thirteen hundred people responding to him. He went toe to toe with me. And a conversation about facebook attribution. How does a guy who has thirteen hundred reports. It's just a certain way of thinking and playing that. They all have decided they're going to do and to me. That's the mode of executive. That i get excited about two from an entrepreneurial perspective and think about investing in because it someone who can talk about like a ceo of a company who. I asked them caq. Maybe they know it is your character in my click through rate or and they don't they start to show that they lack the ability to go into that. I'm like hold on a second. I'm not sure. I'm gonna invest in you. Because i want someone who don't live in the bone but if they need to get the bone they can quickly get there and they quickly understand. Louis which is talking about bootstrapping. I think a lot of it starts with what you want. I think there's at least two two reasons. People start businesses. One is like you have this idea and you just want it to exist in the world and it's only thing you care about. Is this idea and some version of existing and there's others that are really like the idea of starting. A business is very exciting. You're just excited by business and entrepreneurs but the first thing is like bootstrapping is to me a very personal choice. And i think it has to be like what's driving you and what are you solving for me. It was like. I wanna do this for a long time. I don't know exactly what business. I'm going to be an and i don't care i wanna live every day solve problems. I want to work with great people. And i want to do it. As long as i can and for me that was the motivating thing of like. I'm going to bootstrap. Why would i go raise money. Yes i'm sure. I could put together a deck and pitch them. They would give me money. But why am i going to do that. When i don't wanna go on that path. And i think that pat starts i was tell founders starts probably after your angel round you could probably raise money from a bunch of individuals and still go strapped. Once you start taking institutional money their job not in a bad way is to get a return on that capital for their investors. Gotta stay on that trajectory to go to an outcome into an exit. And i don't think by the way there's anything wrong with them at and sacked. I think these are amazing at building businesses. I think they can get you faster better but typically that ends with some kind of an outcome for everybody including yourself and that has to be something you want and might be public. You might be a public. Ceo and so. I think there's it's not just ownership in the equity sense but there's ownership in the like whose show is this. And how is it going to run. That i think as early as you can try to figure it out and sometimes you can start a whole business and go at the second one you go out this one. I wanna i want to own. I want to be the person running the show in charge and i think people who bootstrap for like maintain more of the cap table or vice versa. If that's not the reason it has to be something that you truly want. And you're willing to go through that orientation so for us. It was. We want to do this a long time. If you make one dollar of profit a month or cash flow in the case of bazo orientation you can exist forever and that for us was important. Guan exist forever. We don't want the pressure of burning tons of cash and being dependent on the kindness of strangers for the next round of our funding. I was very important to us. And then we put up whatever money we had and let her credit scores. Drop down eight hundred from eight hundred six fifty or whatever and we charged up a lot. Our greg's part of it one day i also wanna talk about bootstrapping which is very personal. We had set ourselves up with the cushy cushions of life. If this didn't go well and so i don't wanna be the like hustle porn. Yo you gotta go. We went to wharton. I worked at mackenzie. Then i worked at goldman sachs and then i said you know what the worst case scenario is. I'm gonna apply to business school in a few years at this doesn't go anywhere and i'll probably get some insane very high paying job that i'll be lucky grateful to have so yes. Okay charging fifty thousand dollars on some american express who will be inconvenient if that happens but it wasn't a life and death thing for us another version of that. I say that is like i think most people who want to be entrepreneurs they start thinking about it ten years before they on your in my case i had. My dad was fifteen right so by the time i was twenty five dollars. Ready and people man jesse. You're such a natural. No i. I started thinking about it when i was fifteen. You might think about when you're twenty five and by the time you're thirty five you'll have enough savings you'll have whatever and then they'll be the right time for you. We've shift a lot of the math and the thinking. Here's a one is. We say your customers are your investors. Very simple they're the people paying and let's solve for exactly what they need. Which i think all these things have to be taken in the middle. If you go to hard on that you become too much of a services business if you go too far in the other direction. You're just building random stuff. They don't want you to find that happy medium between them and there are some compromise would make. I think that's a really important one. The other one that we who two is my favorite one the unit soul i called a unit sold mass and with a unit sold math. Is you come to me and you say to get the basic operation running. I probably need about fifty thousand dollars a month. And let's assume you're not reading any money. How many of whatever you're doing do you need to sell minus the gross profit to get to fifty thousand okay. You're hawkin supplements or strength training. Or whatever fifty bucks a bottle and you make forty dollars every bottle and you need fifty thousand dollars. Okay now by hook or by crook by any way you can figure out a way to sell twelve thousand of those and to us. That's a big part of the culture early on like man you learn the innards of all these things very quickly to understand instead of talking to me about your investor deck and how many investors you're going to talk to because that's the metrics everyone typically talks about. I go touch me about your units sold math. What's your plan to get all thousand. And i'm passionate about this because not because i think doing wrong with venture funding. But i think it's it gets a lot of airtime relative to this other path that i think there's a lot of potential for and a lot of entrepreneurs will go. Yeah i had my whole pipeline of one hundred investors in this. I go do that. Just apply that same energy to twelve thousand units a month math. They'll come back and go. Wow i did that. And do i have a path. I don't even investor my and go do it. this way the age-old cash is king mindset. And i think being creative and thoughtful about that whether it's using credit cards because that's a deferred cash liability. I talked earlier about negative working capital. Like things that can provide you cash today asking your customers to pay up front just things that can keep you alive and the cash flow concept. Learning very early is super super important. And being able to figure those things out. And and i think the nice thing about it is if you can make a dollar a month and profit or cash flow if you can hire certain number of people if you can hit the units you want you get to build is where you want it and you get this really deep execution ability and problem solving orientation that can take you a very far away and it's your show. You can do whatever you want to take the business in the direction you want it and if you wanna try something different you can try something different. And it's fun. I do think there's meaningful trade offs right. I think there are certain. Businesses like uber or maybe a biotech business where there is a true value in the capital. Getting you to a point of either like a marketplace that get that scale is going to be the ultimate outcome winner or there's something so capital intensity. You could boost. You just need that money. You need that gas to do it. I think one thing we struggled with. I think we made a lot of mistakes early on. We've been every type of inc type. We've been a c. corp we've been. We've been an escort just silly things like that. I think having these having built businesses many times over would have saved us from making those mistakes. The amount of those people have seen about building businesses. Like they're very valuable another one. That was a negative is. It's really nice to be running your own show. It's kinda sad sometimes that nobody else cares about your business except for you literally. No one else was like matter. It doesn't matter to them if anything happens to that or not. Maybe your customers your you have no investors. You have no person who's gone. Hey how's it going is the only figure out what's happening with your business. I think the other thing. I think about with more my pure investor had on is again. There's a lot of businesses being capitalized. That don't have sustainable moats especially in these direct to consumer segments. Where at scale you look at the business and you go man. You're going to raise to three hundred hundred million dollars. Uber i get. I get that created an immense amount of value that could only building wave through speed and scale and all that stuff but how does a business that sells generic medicine to people maintain that advantage in ten year horizon. I i don't think it's possible. So i think that weighs a lot of these bins. Are capitalized don't match. The ultimate kind of economics that they're much more built for the returns that they could generate by getting big fast which is all great in today's economy. Today's all but in a in a more challenging world i think it becomes very tough on those businesses. Can you walk us through this idea of the loop the execution lupin and maybe it's specifically i don't think it is specifically just suited to bootstrapped businesses. I think it's very generally applicable. It's interesting combination of rigor quantitative rigor and acknowledging that. You don't know what the future holds. Maybe there's some over the horizon vision or goal or whatever that that you have to be very flexible along the way but also be very rigorous and lucy gucci along the way like hold yourself too hard standards and that there's this happy medium for the best operating cadence within a business. Can you walk us through this loop. Let me talk a little bit about why we built it. That's a very important piece of backdrop so we started the business when we were twenty five in the first few years like most businesses is really fun and then the business actually had real revenue niba dot and then we realized we were waking up more often than not shit scared that somehow the golden goose was going to go away and we said you know what we thought. We wanted to build something long-term and cash flow but like a cell like. Let's let's get this thing that exit we grew it really fast. Glass door started popping up very negative things about the culture. My wife was like what's up. Dude you don't seem that happy doing this anymore. And we really got to the point where we said man when i joined this and our culture is not great. People don't like the culture and it is a very common entrepreneur fan especially in the first business and so we are working with the coach and we got very. we said. What's what's going on here and there was a few things we started doing. This thing in the conscious leadership programs is book the fifteen commitments of conscious leadership which has been pretty life changing for me. And i'll just share a couple of concepts in the night. Talk about the loop. So the first concept was types of motivation. And there's these five types of motivation according to this paradigm and it's fear extrinsic intrinsic play or genius and then like amphitheater loves and That's more about the human experience. Not about a person individually and these are all these are tracked also we might feel these all five of them any given day forgiven different things that are going on and in general were motivated by them right and you think about fear motivation as like a chip on shoulder. I'm not great enough. I'm going to go conquer the world and you think of empty love is like my mother. Teresa i'm gonna make everyone's life a little easier extra money. Titles intrinsic is my own thing. Play ingenious i think of audit or it's like oh i just love what i'm doing. I'm enjoying it. And they talk about fear. They're all effective forms of motivation. By the way and there's not better than worse. Fear tends to leave a negative residue on yourself and other people and it tends to run out on a non-renewable resource the common thing. Where someone who got my number then you get to your number. Oh no now. I want that other number because i was scared now near us or run out of motivation. And you know love and empathy and play genius tend to be Renewable and they tend not to leave an invasion of lift people up as you do them and so we started learning about this and kind of had this moment where we were like. Oh my god we've been more or less totally fair motivated for very long time. And no wonder the culture no wonder everyone feels negatively and the other concept tie into this is concept of context versus content and this is another paradigm which is like oftentimes really bright people especially go. Do i like healthcare. Or do i like marketing services. Do i like. And i got to this point personally where i was like. I don't like marketing services. Why did i start a business like this. And i'm not motivated. Keep doing it and help my coach. You were fear motivated. You made the money's sold a part of your company and now you're just you don't feel scared anymore. And so you're struggling. With what motivates you and kind of went through this whole process and the context versus content. Idea is it's sort of like from where are you doing. And you know there's people who are mission driven cancer curing companies but if they wake up every morning and coming from a place of fear or they're worried about how the show opened trades or how much money they're gonna make. You'll hear that they're not happy. Their cultures are not happy on the flip of that you'll hear of like insurance brokerage or some random commodity business isn't sexy doesn't have a great mission but the people doing it the founder especially coming from a place of wanting to make his employees lives great and wanting to help people get better in their careers truly wanting to help his customers and those businesses are flourishing cultures. And all the great things and so that's a concept of context versus content from wearing coming and a lot of the paradigm conscious leadership is just starting to i notice in one moment. You're feeling fear. And you're feeling like you want to help an empathy and we looked at okay ours which we'd been using and we said you know cost these things. There's two issues with them. We didn't like in particular and most of the goals setting processes we said. They seem very fear oriented. It just felt like you had this arbitrary goal out there and you're gonna from fresh fresh to hit it and it's got to be a big jump up and if i don't hit it. Oh gosh you know. That's not a good thing and the other thing we didn't like about it was it tends to us. At least it seemed like way better for business. You understand and know to go. I can prove conversion by twenty percent but entrepreneurial ventures you don't exactly know what's going to happen and so the motivation behind the lupus. Can you build an organization. A culture that gets all the benefits of entrepreneurial thinking and approach speed ambition. Creativity problem solving tenacity. All these amazing things and mitigates the things that tend to make humans lives not fun the fear of fundraising the failure. The someone getting rimmed conference room and by the way. I don't know that it's possible to be clear. Bill gates oxide himself as being a terror when he was building the biggest company in the world. Uber we've heard stories like there are other stories like red ventures where i think. They're truly they have accomplished versions of this. But that's what i'm most motivated by personally is an organization that teaches people brings them up but also his ambitious and exciting. And they're doing that. For the purpose of learning and growth of the people and that people sometimes refer them as deliberately developmental organizations that the businesses are there actually to serve the people's growth in learning not the other way around. And that's like i'd call it very aspirational. But that's my aspiration for what i do with my career forward from here and so are lube is the first version of like okay. Well if you're gonna have an operating if you want that you have an operating system that supports that and so it starts with this idea of what's our desired future state. What do we want in the future. And that's not uncommon in view this example of jfk. Saying we wanna put a man on the moon sex motivating exciting thing that want. But it's not a thing you have to do or you should do. And you often hear the words entrepreneurs and business ho should really get this launch or we should really become the highest market share. No no no. It's not it's not thing you have to do or you should do or you must do where the world ends you really want. It's coming from desire. And ideally coming from a place or a actually helping people in some way so that's way it starts with that's the desired future state now part most people get but it's disconnected from today's reality. It doesn't have to be where today sets and then the next point is there's this idea of current reality and this is a really hard one. This is actually one of my biggest personal development challenges. I'm the guy who can do. Desired future state all day. And then you talked. I just did it. Got you excited about my vision of an organization and then current reality like jesse. You're not you know you didn't do reviews for people. People five people are waiting on their reviews. What the hell right and part of reality. The challenge of it is first of all seeing it clearly and not with rose colored glasses or not seeing what you wanna see. But what's actually there which i struggle with and then the other part and this is really interesting one is accepting the current reality and so what acceptance means what we do in okay man. Our numbers desired future state was fifty percent revenue growth. Or whatever. and now it's twenty five percent. We try to explain it which to blame. We go to these negative places which is very common. Oh it must have been because of these three things happen. And you know what honestly if you just think about it. This gets very sort of meditation. Whatever mindful it's just what reality is in this moment. This is the number. This is actually what happened and oftentimes. We don't think you can do the desire for until your accepting what is here and just fully at this is where we are in all of us kind of go through that sometimes where we have this bad situation. We didn't get the college we want to eventually when we get okay. We're gonna accept this now now. What now to what we do right. It's kind of like trying to make that. A real system process that third of the basics. Okay here's where we are today. Here's where we'd like to be. And then we have this thing that we call waypoints and it's a sailing analogy. I'm not a sailor. Somebody taught this to me. And it's the idea. This is where it's a little different than okay. Ours is when you're sailing. Apparently i'm out of sailor. You don't just say. I'm going to go from here to india. You go to get india. I i need to figure out how to get the hawaii. And so i'm gonna actually my way. Point is next. I'm gonna put my degrees in this thing. i'm gonna get to hawaii then from hawaii. I'm gonna look at where the best place to go is. I'm not necessarily going to go to japan. I might go down to tahiti. Or whatever then like you're you're you're sailing around the world and that's we think that's more similar to the process of building a business than okay are. Okay are getting into business school. There's a checklist. Do your g matt right. Your score whatever. Go through this whole process essays get recommendations and then you get into business school or not. This is much more of a. I don't know exactly what's going to happen. So then the way you set. Goals is much more about either hypotheses. You have doubts you have which is an interesting one like. I'm not sure that people will buy this product. Lemme on ad campaign to see if people will buy it or i'm not sure that the contents gonna get that. Let me launch five of these things to get content and it tries to really in gender that beginner's mind right sometimes we call it. Learning leverage is goals a learning leverage. Means what can teach me the most. And this moment about what i'm trying to figure out there's some prioritization against them. But generally you're operating. Less from i must hit this metric or point seven of this metric and more of where do i need to get to the next step. What's the i'm going to get as as it relates to that. Then what do you do so you set that all up. Then you do what we call entrepreneurial rigor and this was like a learning. We had after longtime which people would say. I'm either really rigorous and analytical and analyze everything. I come to get done and we neither of those quite satisfied us okay. There's a two by two here and there's like hustle on one vector. Yes no and then. There's rigor like are you being analytical yes no and and we actually use it in the coaching technique internally which is like hey you're really good at analysing but when it comes to getting software needs them. Where you're really hustling. But we need you to be a little bit more analytical and we think that the best entrepreneurs do both of those together right. So they're looking at numbers they're reacting. They're constantly going through their own version of this. And that's the way you execute and you try to accomplish those way points and then the last part of the loop accounting and response and so counting the couple interesting things we learned counting is separate from response because think about what typically happens in an organization is iran my way points. I didn't prove the thing out. I thought i would prove out the numbers income the way they would. They wanted them to immediately. If you're an executive or your person. The narrative starts to shape around that. Why did that happen. What's next and we said you know what let's pull. All the emotion out of accounting accounting is just what happened. Tell me the facts. Tell me exactly and the facts could be. We miss this number by this. We beat this by this accounting. We realize and we started doing it in meetings. It's like a five to ten minute process because there's just no story there's no narrative there's no nothing attached to it. You just go this with this. This will happen is up this and then the response is a is a much more interesting conversation okay. What can we learn from this. What we're like pretty bad at setting goals as it relates to. How many creative. We can build them this much time. We're pretty bad it's ending. Goals around acts are widespread. Maybe we didn't actually miss the mark. We're just not good actually setting the goals right or you know what. I don't think we have the right people who can do this. So the response is a separate activity where you start to think about and the response can range can tie you back into any of the three buckets so you can say you know what i think are desired. Future state was off. I don't think people want to buy direct to consumer rubber gloves. I just don't think it's a thing 'cause because my way points taught me that nobody clicked on the ads iran. It could be testing the wrong things it could be. My execution wasn't where i'd like to be but then based on the response you kind of start that cycle over again. I'm not sure that any of this is super original idea behind it. As a is language matters the approach matters the words matter and it's about learning and growth of the people and of the process and not about must hit this goal at all costs. And we're trying to make it fun and enjoyable and a player and tation for building businesses and entrepreneurship and not a not like life at all. Costs has to be put in this direction. You i always leave our conversations thinking about this unit in the right spot. Which is this combination of rigor and hustle rigor and curiosity qualitative and quantitative meaning and execution. There's this kind of middle way that is powerful in business. I think your career has taught you that you know my closing traditional question for everyone so asking now. What is the kindest thing that anyone's ever done for you. Wanna talk about is founder adventures rick elias as a mentor and an inspiration to me and as about the culture and how the culture got really negative ambush. He's the only person who's ever put money into the company other than me. Nick chris hundred gay and you did. This deal flew out to charlotte to meet with him. And we took our whole management team with us and like fancy dinner and he comes in and he's like how's the temperature of the company. Right now are people are people doing this. And it was a very innocent question. There was something about the way that conversation went down. We're like me. We didn't say anything about management team started. Being like people are tired. The cultures gotten really rough and he was incredibly kind in that moment. And it's like a testament to who he is as a person and a business person which is he's operated businesses seeing these cycles before but in my mind i literally was like. Oh my god. This guy just gave fifteen million dollars. And if i was him. I would remain. I'd like what the hell did. I just get myself involved in and his response. We kinda took me aside later after the dinner and he was just like. I know building businesses hard. I understand how this is. And i'm here to support you know i'm like you to be a part of this with you and can you imagine out moment getting that kind of grace from someone and even me as a developing leader just showed me like it was one of the first things a man. There's a different way to do. This is a different way to lead a different culture fantastic. Well this has been so much fun. I could do this with the everyday. You've taught me basically everything i know about this part of the business world so i'm glad we got to do it on the record. Finally thanks so much for your time. Thanks patrick this episode was brought to you by vanda. In this five part miniseries. I sit down with fantasy yo. Christina kakapo to hear about the origins advanta how van is automating security and when companies should look to partner with fanta in this episode christina and i discussed how she encountered the problem of sock to compliance. Why the traditional model forgetting sox compliant just doesn't make sense so christina. I think a good place to begin the story. Advanta is how you first encountered the problem itself. It's not exactly a problem that a lot of people wake up even aware of or knowing how to solve but it's it's an increasingly critical one in the world of software. How did you first light. Upon the idea itself was sort of the founding insight absolutely so to tell the story one worked at a dropbox and worked on a new product at the time dropbox keeper their collaborative document editor. Who are small team of about. Ten people trying to take paper to market for the first time sort of got sideways with dropbox itself. Because we realized we couldn't take paper to existing dropbox customers because paper wasn't talked to comply in it wasn't tested it wasn't vulnerability monitored etc and we were the ten percent team. That had this kind of terrible choice of bieber puzzle product work for here and a half to go get socked to compliance or skip that but then again take this to market. You're not allowed to give it to any dropbox user and a terrible choice so at that time. Just talk through literally. What sucked to is what it means how it's risen to prominence and before you started building fanta. One acquired us octo seal of approval today in the market. I think the way we explain it to customers. Talk about it. It's just it's the de facto default way to tell your customer that you take security seriously and you have good practices in place until it specifically means this host of one hundred specific tasks that you complete on a regular basis but sort of higher level. It just gives your customer assurance that they put that in your tool you'll keep it safe and you will leak it on the internet. I think is a really important service. Reverend wright increases trust between vendors and buyers makes a sales process go faster gets more software bought some innovative companies. So that's why we think about what a talk to you does on the market today and then in terms of how you used to get one. It was this sort of bespoke arcane consulting process where you'd start by calling up someone who done it before sort of like taking a company public at the. Cfo you can't do it till you've done it too similar here. You can't go through a sock to until you've gone through a stock to you can find one of those people. They kind of charge you a bunch of money to to tell you about the tasks you needed to do in the nearest left on your own to do them. And then at some point in auditor would come in and ask for proof that you did what you said you did and sort of rinse and repeat every year. If we've done with paper at dropbox at the time it would have taken us about a year and a half to go do all of that and that's going to full team working on it and so it's a ton of time and energy if you enjoyed this episode checkout join colossus dot com there. You'll find every episode of this podcast completely transcripts show notes and resources to keep learning. You can also sign up for our newsletter colossus weekly where we condense episodes to the big ideas quotations and more as well as share the best content. We find on the internet every weekend.

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Thomas Tull - New Physics of Business - [Founders Field Guide, EP. 30]

Invest Like the Best

58:17 min | 3 months ago

Thomas Tull - New Physics of Business - [Founders Field Guide, EP. 30]

"This episode is brought to you by vanda. Does your start me to sock to report to close big deals or do you already have a sock to report and wanna make it. Easier to maintain vantaa has built software. That makes it easier to both. Get and renew your sock to with antics. Continuous monitoring solution you avoid hosting auditors on site and taking screen shots to prove that you're compliant so you can focus on building your business fanta parts audit firms. Who file your sock to report directly inside advantage at a fraction of the normal cost. Hundreds of companies including more than one hundred y combinator businesses are leveraging bantus today to streamline compliance and focus on building their businesses founders field guide lizards can redeem a one thousand dollar off coupon advanta dot com forward slash. Patrick that's advanta dot com slash. Patrick this episode is brought you digital ocean digital ocean provides founders and creators with the platform. They need to get their website and apps off the ground all with low bandwith pricing to save them. Money over other cloud providers. If you're looking for the best place to build web apps or api back ends on robust infrastructure digital ocean is the place for you. They provide a fully managed solution. That handles your infrastructure operating systems databases and other dependencies on their new app platform. Product at platform makes it easy to build deploy and scale apps. Or if you prefer to manage your own infrastructure digital ocean provides a suite of products that gives you full control to learn more about digital ocean get started for free at do dot co slash founders. That's do dot co founders alone. Welcome everyone i'm patrick or shaughnessy. And this founders. field guide. Founders field guide is a series of conversations with founders. Ceos and operators building great businesses. I believe we are all builders in our own way in. This series is dedicated to stories and lessons. From builders of all types founders. Field guide is part of the colossus family. Podcasts and you can access all of our podcasts including edited transcripts shouts and resources to keep learning at join colossus dot com patrick o'shaughnessy if the ceo of a shaughnessy asset management all opinions expressed by patrick and podcast. Guests are solely their own opinions and do not reflect the opinion of o'shaughnessy asset management this podcast for informational purposes only and should not be relied upon as a basis for investment decisions clients of ashanti asset management may maintain positions and the securities discussed in this podcast. I guess today's thomas told the founder of toko. Llc an investment holding company that invest in businesses with high growth potential and help them apply machine learning and data analytics. Thomas is also the co founder and former ceo of legendary entertainment the production company behind the dark knight hangover inception. Three hundred and many more i- comic movies which he sold in two thousand and sixteen in our discussion we cover. The movie industry's value chain the recipe for trying to make a successful movie. How legendary pioneered the use of data analytics to improve. Its odds and thomas's concept of the new physics of business and why it matters for what he's now building at tokyo. Police enjoy my conversation with thomas. So thomas because you have led such an interesting career in and out of business. I thought a perfect place to start before getting to your backstory would be with a big overarching question. Which is what is your philosophy of business. What has united the various things that you've done in terms of how you attack an industry or a problem space and made something work. Each situation is unique. But if i had put my finger on us ruin. I think it would be to find an interesting industry and to find a way to enhance the business model using technology usually or a slightly different model to get outsized returns. That's probably the through line. I say that in trying to align myself with people that are immensely talented. And when you put those two things together it's worked fairly well. What was the first example of you doing that in your career meeting attack i think an industry that was around the people knew about but doing it in a new way or applying new business model to it. I don't do a ton of interviews for one of the things that spend amusing to me is a while ago. Somebody gets researching saw that. I owned a laundromat chain in my twenties. And it just seems like that shows up everywhere wikipedia. Whatever it's probably the first example because at the time i grew up in economically challenged area and lived there for a little while in my twenties and the problem that we had with laundromat chain is that it was slammed on weekends and during the weeks nobody was in there. If the time all you had these slide point operated machines. You couldn't dynamically ching's pricing so after finding manufacturer and iterating with them to puta rising it you can have variable dynamic pricing in entice people to come in during the weeks that have the time for lower prices and smooth things out. So i guess if i had to point to the first example of that we'd have to. I'd love to spend quite a bit of time on everything you learned founding and running legendary entertainment not just about the company but about the ecosystem in which it operated. I think media in general any application of analytics in media is one of the major through lines in the world of business today. I just think it's sort of affecting everything and you had a front row seat running one of the more interesting companies in the space. What was the origin story of legendary. You first get introduced to the idea that you might want to be in the movie business. And what does that early formative experience like. I became fascinated. I had zero experience. Newsom people that worked in the industry. And i became fascinated with business law and then back in two thousand three two thousand four when i started look at this was a thirty billion dollar industry at the time and there was no institutional capital for an industry. Big there's using a jason capital structure and there wasn't any so i thought it was fascinating that there was sort of this artificially larger moat around the business. Because you had your major studios ecosystem. Hollywood with agents and so forth and i thought that i could develop company the chapter. It's overhead fairly low so not massive headcount used the distribution system in this case warner brothers on a goal basis only intellectual property and then eventually make your own content and be responsible for the creation on a global basis that you could build a valuable company but first thing had done was to run models and take a look at the previous ten years of studio performance. Say hey even if you did a great job. Is there any money to be made there. And once i convince myself that yester- is then sort of without the capital markets. Put it together. That still remains. I think the most difficult thing that i've ever done in my career as initially raised capital for legendary. Because i was thirty. Two years old. I had zero experience in the industry and i think the average meeting. When i go in pitch somebody took about twelve minutes. And they'd say there's a bottle of water on your way out out nice day but it was really started just as being fascinated the business model in the opportunity in the size of the industry and being able to look at it safe. We can do this slightly differently. Could you go the valuable company at love to dig into that. You mentioned the fascination with the business model. Maybe even one step back to begin. Everyone's going to be familiar with movies in general and i'm sure we have watched a lot of movies that you've created. We'll talk about some as fun examples but talk us through the players around a movie. So let's pick one godzilla vs kong which my son's excited to watch which is coming out soon. Big movie people watch it. They buy it. They buy popcorn cetera. What are the major categories of players studios distributors etcetera. That sit around a given movie and when you came to the business when you were starting legendary what did the sort of profit pools look like back. Then like who is making all the money. What did it feel like to you as you were fascinated with that early. Business model sold ledger in two thousand sixteen. And i can get into sort of the reasons for that. I was worried that there were these. Massive changes coming in now has one hundred percent happen. Colin has certainly accelerated but these changes were coming changed the industry. I think warren last couple of years than many in the previous combined history of of industry so if the beginning what you would do is sort of put a movie together and has the elements of the script the talent attached who is the director who the actors etc you run models based on those things. You take com set in ceo case. The movie is budgeted year. It's got these stars this director in this genre. What are sort of expected outcomes and then you run regressions and see how big a risk you're taking and the idea from the beginning. Legendary was a most of the time make movies aimed at sort of the fan boys and girl comecon audience superheroes and things of that nature and build a brand that serviced. Those fans. that was idea number. One and number two was that there was a massive amount of growth going on internationally with capitalized on that. Have big tent pole. Event branded movies. That would appeal globally and then to be able to keep those films in your library that would continue to cash flow for you for years in future. The example of this was we're partners warner brothers. They were amazing. Partners to time warner brothers. And i started was run allen horn who is still somebody. I looked up to the stay. He's now the studio at disney so understood very early. What i was trying to do with legendary. So when you put a movie together the stakeholders are whoever's the capital lopped so in our case it was generally speaking fifty percent from us fifty percent from warner brothers and then one dollars would distribute worldwide. They would charge a fee for that so that was sort of their hedge and certainly for them putting up the marketing money and so forth and then back then you'd have interested parties. Generally speaking if you worked with a-list director that director we have a decent what's called gross participation. A big actor. You have a big fee. Plus i participation and you would then clear movie out the movie would do whatever it did globally in box office and speaking in those days every dollar that you saw like oh it opened sixty million dollars will you got percentage of that in the exhibitor. Not percentage of that but after we put out. Then you'd have this cash cow. Call the dvd which was highly profitable. Then it would go onto rental wa sephora smack knows daddy's hcl atv view then onto free tv. The ownership of these libraries was extraordinarily valuable in stable cash flow. That's obviously all change. But those are who the stakeholders were and you'd kind of look at it. Say what kind of a risk taking here if you had to characterize it you may ten movies. You probably have two or three that. Don't work that you lose money. On sort of three. Through seven or eight make their money back and then hopefully eight nine and ten are the dark knight three hundred hangover et cetera. That make massive amounts of money that kind of make up for everything else. That's how the business worked. When i started in in remain that way and certainly changed but as we got into fourteen fifteen sixteen things change quite a bit as you think about just sort of such a fascinating industry that everyone can relate to the nature of top line revenue and how it's changed. Just say like we're at the end of a revenue cycle and movies. Ten years old at this point or something. Let's say in two thousand five or two thousand ten. How much of a one hundred dollars of total revenue was made in the theaters versus dvd versus all that downstream stuff. This is a question about intellectual property which will talk about in a minute here and then how is that hundred dollar pie changed or changing. Today i saw it depends on the movie itself. I mean if you have something that is an absolute jogger not like dark knight was or jurassic world. Then you're making a meaningful percentage from fox offs. There are other shows that sorta find their audience. Maybe they don't do that. Well in the theatrical release but sign their audience in the secondary market so there are certainly examples of that and then if there are global ten foals. You have merchandising. You have toy sales. You have things of that nature. And obviously disney doesn't amazing job of maximizing every nickel around their properties. And then i think we're that his changed. Remarkably today is used to something that we talked about in two thousand fifteen at a board meeting. I was looking ahead and saying on olias net flex ended redo an amazing job of taking it from a mill. Back your dvd for rental and change netflix. And what it is today. But when netflix realize that hey we can make our own stuff like hbo found out was frozen others. That is what's now in. That's how you grow your your subscribers and was able to put itself in a position to make first class content that drives viewership will obviously the way the public markets especially value that is different than his traditional media company. So you're bringing a nice to against in terms of hayward media company making movies and television versus someone that has a technical aspects or subscriber base that is valued in a much different basis. And i think what was interesting to observe is. I've been friends with read. And ted's rando netflix. For time is when they first put out houses cards. There were being ridiculed middle east in the room. I was in in la. How stupid is that. They're gonna put out the entire series all at once and then when people watch it then they're dot. How dumb is that. You'd have to stretch this out over a thirteen year twice six week period. And i guess found out pretty quick that it wasn't dumb the other thing was interesting is where hauling ecosystem could sell. It had a monopoly on the talent because of the symbiotic relationship between the agencies in hollywood all the scripts all stars all the directors and went there. Not only i only now. You look at some of the most interesting things that are being made or certainly amazon apple net flicks disney plus cetera. So it's completely changed hollywood forever. I have no idea what's going to happen when the world goes back to some version of normalcy and people have the opportunity to go to the theater. I'm not sure it's going away. I don't think any of us know that. I certainly thank the idea of putting a seattle release out in only counting on that. Globally is going to be a stretch. So i certainly hope said big epic movies. Things like avatar. The marvel movies are steven spielberg movies or criminal movies. You still want to see them on a big screen. Potentially but i think it's harder and harder business model to make works. What did you learn across this. Whole period about the concept of intellectual property writ large. That's important theme here across everything you've talked about from building legendary basically producing all of our favorite movies. That aren't disney's or sort of products of yours. That big temple fan boy fan girl concept to me about intellectual property. I p what lessons you learned early in throughout the legendary experience that you carry with you. Now certainly i is. Talent is not functioning. There are a handful of people in the industry that consistently are just incredible of their craft. I had a front row seat and have the privilege of making five movies with chris nolan for example. He's just incredible one of those singular talents. And if you can sorta park yourself next to that that's a good thing. There's so much content being produced now that the handful of writers directors actors that are truly exceptional just like any other field. There are folks that are absolutely on america. Crecy the top of what they do and their services are higher demands. perhaps than ever so. I think that the things that i learned is that there is no substitute for talent. And on the intellectual property side being able to start with a great story a great script a lot of times if it's something that has global appeal one of the things that we did it legendary. Was this whole monster verse. Which king congress has not zola's now is sort of what we built to. I'm excited to see it myself. But i loved godzilla. So i wanted make a godzilla movie but just like marvel at done with adventures and having a place that you're building to that's very different than just doing what off movie. So that was something that we sought to do is to have godzilla. Movie can call until two and then finally absence site again. It has fundamentally shifted so much. I'm really interested to see over the next three to five years. What the industry is going to look like. What do you think makes crystal and so exceptional. Another movies are a lot of my favorite movies personally of all time also all so different and creative in fairly unique. What is so singular about his talent. I'd say it's confluence of raw intellect. He's very smart. He's a born storyteller but he's able to tell story with just a twist things that are not obvious not on the nose and then his style is so visually different. And i think that when batman begins dark knight then inception all of his movies. Interstellar came out especially when dark knight came out. It's not digital. it's not disposable. Is stunts many of them. Were practical in that stood out. His visual style is really i in his different in that something that i think when you combine all of those things and it's also incredible writer. He writes most of this stuff. And i also think that a lot of times in hollywood a script go through so many rewrites with six different writers is harder to have a singular vision in a story. it's comprehensive does is not good enough. Let's get another writer here in rewrite the same. Clean it up by the time you're done. The original story that got you excited is now lost a little bit in with chris. It's his vision from start to finish so i think raw talent to find those things. Make him one of the greatest filmmakers of all time. I love to talk about the data analytics theme of everything that you've done starting with legendary pioneer of applying quant to the movie business and love to hear that story. You already mentioned it with. The laundromat may be as the prime original example like just using technology to enhance the existing business model. What did that look like in the early days of legendary and how to evolve. What got me interested. Just even though the marketing department did a remarkable job cut rate trailers and so forth. We spent enormous amount of money to open these films up. Especially as the windows up shorter. You'd have to spend the time on a and then ninety days later. Reliant everybody to go buy the dvd or digital version of the cell. We were getting hit with these massive marketing bills. That made it harder and harder to make money the phrase the chap running through my mind is to find people who are persuaded the example that i always use. Is that if you're making the dark knight is there's a fifteen year old wearing a batman t shirt and reading all the comics year. She right you don't need to spend any money on that person because they're gonna go see the dark knight and then on the other hand. I would always say that. If i gave my mother two free tickets and twenty dollars. She's not going. There's no reason to bombard her that we would sort of. It's yours with all of these television commercials or billboards and things. Or i don't wanna pick on it but newspapers plans. I didn't who is watching the dark knight looking it up in the newspaper. Go find the times. So i had a big moment eric schmidt at the time was ceo of google. It is longtime friend. I called eric and ended up sitting down with him in drawing up. I wanted to bill which was a analytics platform to find people. That were persuadable. And as per usual. Eric handsome great insight and advice. We ended up buying cheech analytic shop in boston. And i was fortunate enough to meet a guy in. The roller is absolutely really data scientist. So he led the team forest legendary and the first movie we ever used it live longer. Godzilla and i think. The rely skeptics. Who said look. I think you have hit the on your hand you're cutting the advertising budget meaningfully and we said we're gonna stick to our convictions and tracking. I think had us opening fifty million dollars. You'd be opened at ninety four and it was the ability to find people using analytics online and to cause an action. So not just here you aware of this but want you to buy a ticket and to speak to them in a way that it was pretty targeted and in the early days somewhat tweet for them. It had a pretty big impact on the company. We then used it in the television division than ended up licensing it to other studios and it had a meaningful impact which not experience certainly had a big impact on my point of view using technology and thinking about applying it in spaces and places that might not as a lot of innovation or maybe non obvious in the certainly led to my thinking in my formation of telco my holding company. What would you describe as sort of like the competitive frontiers. The places where differentiation or skilled matters most in the kind of movie world when you're at the sale of alcoholic the peak of your powers. What was it that you were better at. That mattered to outcomes relative to other studios. First thing is it's all hard and there is one hundred percent lock involves because when you run film through a camera there are all kinds of things that you have no control on. What kind of chemistry is cast in a half. You never know that. And so they all show up and doing what is going on at the country at the time you release the film. I remember is not our film but weren't rollers. Put out american sniper. I believe incendiary which previously had been not fertile ground for releasing movies and the country. Whatever the patriotism of the film celebrating. Us special forces and navy seals the job. That bradley cooper did certainly clint eastwood. Whatever it was that time turned it into a massive hit. So it's hard to have your finger on the side guys especially when you are making the film probably two years before it comes out. It's tough to predict that. So i would just say that putting yourself in a position to be successful in two big buckets. The first is hire the best in a line yourself the best and try to make the best content movies and television you can and the second thing is to put yourself in position financially to be successful. I being disciplined as you can be for the type of film that it so if you do those two things hopefully puts you in a position. The interesting thing about it is that when i started everybody would say to me in the press and everything. These attack attacking finance guy. What's he doing here. And after i sold the company and went back into tack tight ends that it was like well. You're a movie got. Is there anything on the technology side that you think is interesting. Since you've straddled this media tech finance these various worlds anything nascent that other than virtual reality which you mentioned that you're watching carefully and just interested in. There's a couple of things that interest me. The i is is a consumer one of the things that i'd love to build or have someone with time to build. It's an ocean of choices. So you go on and you're trying to find a program and you figure out what wait a minute. I have to have this app in order to get this program. Wait a minute. Is it on this service or do i have to go over here and the passwords and just two. It's becoming a little bit of a tangled mass to navigate. I would love someone built an overarching. Hey you just tell me what you wanna watch will organize it for you and you're gonna pay one price and you can access things you want access to parkop so to speak. There's just so many passwords in so many different things that i think it's harder and harder to navigate. Maybe you're twenty three it is. That's something that i hope. Somebody would the other side. It's interesting on. The production side is again. A computing power is getting so good that you're able to shoot some things construction digitally in a way that is starting to look more and more believable and that will open on storytelling. In a way that. I will be very very interesting as we kind of wind. Down discussion of movies all sorts of anti up with my answer to the question. So there's been three movies. You've made two of them that i've ever left a theater just like feeling like completely mind blowing. The i was the matrix. I think in nineteen ninety nine the second to our inception and dark knight like literally remember the theaters that i was in such cool cinematic experiences looking back on your career. What movie standout individual movie stand out for you as the most inspiring or mind blowing in terms of the experience of the viewer. I would say the hands full for me. Were certainly had three hundred just because that was early days for legendary in two thousand seven and we believe deeply in i think almost every other studio hollywood pass on it young filmmaker. It's time name zack. Snyder and it came out in. Its time was the biggest r. rated opening ever. I believe that really helped the company but itself on the map and so that was certainly a big experience the dark knight just because to this day. I think it's a perfect movie. I said out as a fan. Chris just delivered an amazing movie and he's ledger to me. Delivered one of the best performances by an actor in history and then without question the movie forty two that was a privilege to make. I have the opportunity and still am very close to rachel robinson to this day and just to be able to tell jackie robinson story and to be able to bring it hopefully to the world's attention for that that was something i'll never forget and it was incredibly meaningful to me bit more about that last one seems like it's made a huge impact on you. What about that. Experience is so important for you. I'd say everything about that. Which was i had. Two people in a two weeks span talks amount. Was joe morgan who unfortunately lost this past year. I'm on the national baseball hall of fame board with joe and she just said to me over dinner one night. How hollywood has never for twenty years. Everybody's been telling us they're gonna make jackie robinson movie and that's important story and i wanted to introduce you to rachel and then ken griffey junior. Who's a an old friend. We were together in la and he said to me you know. I did a little league event. A couple of weeks ago at the end i asked kids. Who knew jackie robinson watts. They said like three kids raised their hands. And that can happen. Joe introduced mrs robinson. I don't get nervous very often. I was nervous to meet a living icon. And i promised her. We make the movie and mitch quickly brian. Helen was my first phone call. Wrote and directed the movie did an amazing job and then just a long way getting to hear rachel stories stories and getting through her through her family. Getting to know not only the jackie robinson the politics knows about but one of the amazing man in just trying to wrap my head around. It would have been lied to nine thousand nine hundred forty seven to how all that pressure on you in not be able to seek out matter. How many oral things you're done to you. Have your family threatened and go out there and do your job every day and then just as a. He was a second baseman and shortstop they put him at first base in the major leagues. He won rookie of the year. Baseball may have been his worst sport. You know ucla. He played football earring tracking amazing athlete in such an eloquent. Strong man is just somebody who story. I've always been fascinated by and just after that movie came out. Just a number of folks that have come up to mayor or talk to me and said we watched with our family or so it was just an amazing experience and something that i treasure and then we also lost chad boseman. Who is like family to me. I miss very very dearly. In getting no chad in watching him go from playing this icon to the black panther and just one of those force of nature talents. So they're just a lot of things about that movie. That making credit recessions sessions me. Those are two incredible people if you could having spent much time with them or immerse sort of in their lives. If you could argue everyone out there with some aspect of what made jackie and chad special. What would they be in. Each case will do. Try to copy from them and implant and others quiet dignity the ability to go about your business. I think when chad got really sex in still did meridian to go through what he was going through and not to tell the public or not even to tell anybody outside of his immediate circle and just to go to work every day and not wanna talk about it and just say it is what it is. It is hard to fathom in articulate what that type and strength is and i think when you think about jackie robinson quietly going about his business regardless of the obstacles in the hatred and everything so i would say. It's quiet dignity. The grit the ability to go about your business under incredible challenges. It's just something. I'm in off both of them. I love that answer because in many ways were in the age of the opposite sort of flashy cheap signaling and sounds like your answer is basically the opposite of that done steadily over time. I think that's right. I'd love to turn now to. I love this term. You used yesterday what you call the new physics of business. Maybe before we get to those new physics you could describe what you're trying to build at toko. The holding company after the experience of applying illitch louis and television business. One of the things that i thought about was. How could we take technologies. Artificial intelligence data science and point them at companies that didn't traditionally have a lot of innovation in potentially would not have the access to talent to sort of build those capabilities and get those outcomes so the idea was alco was to create a holding company that also had maximum flexibility on capital structures. So not a vintage gear in terms of the funds not asandra raising mode where you're measuring these things of that nature for the most case reader on the entire company or majority in almost every case in we supply not only the capital but we had taco labs which is a bunch of folks with backgrounds artificial intelligence data science machine learning cetera to the able to work with the management teams of each of the companies. And hopefully get a much bigger results because you're able to bring those capabilities on top just to kapil. So hopefully it's the general business. Where with all of the toko management team coppell's with being able to provide access to some pretty great technical talent and certainly the patient capital that was sort of the and we look at industries and then try to find companies in those industries interest. Us that not only have classic management teams but management teams that embrace being able to use to allergy teeter. Change your trajectory or build it that way from the beginning before we get to some of the specific examples of the implementation. I think there's so much white space in modernizing or updating the business model with technology of proven industries and use cases so only get into some examples. But this concept new physics is fascinating maybe starting with velocity. Can you describe what you mean by this. We talked yesterday. I just said that to me there. Is this new physics of business. And i think that is i. Try to ignore gravity. You might know it. But it's a fact sir profound and will hit you regardless of your lease so to me. What some of those things need is just the ability to adapt and understand the velocity of not only change but things that can happen to you instead of saying look we know that we need to eventually morph our business. We can see the wheels turning and where this is going to be in three to five years. Forget that this is something that happens tomorrow. A competitor makes an announcement a breakthrough. Technology happens everybody on the internet decides to jump to another platform it all of a sudden your entire businesses different in changed and you either tossed out railroad tracks wondering when you're gonna hit by a train or you understand the has to be nimble what does it mean most tangibly for the operating cadence or strategy of how to run a business in the world of velocity will come back to digital fluency and somebody's other ideas in a minute but just thinking about velocity. It just seems like so. Obviously true that it's a two sided coin. There's a lot more risk. There's also a lot more opportunity to move really fast in a good direction or a bad direction. What does that mean most to you about. How businesses should be run relative to how they were run twenty thirty years ago. I think the first name is you have to measure twice. Cut once and really understand what you're trying to do in business and how you can tell if the table. And if you can't really articulate what your advantages. I think you're gonna have a tough time from the beginning but on top of that and this is what i think has changed is you could be accorded a year three years five years into a business. If done everything right. He's got a great culture. You got a great product and then for reasons that have nothing to do with what you've done. That black swan song hits whether it's a black swan within your company. Meaning something happens. Didn't zillow's size. The company also. Well how do you plan for that. I just think company today you have to have conviction but at the same time you have to have the elasticity and be able to stretch and move and grow in different directions and to be able to deal with things that come out of nowhere and that goes back to the old adage of you're really batting on people in management teams. He just if you think about how often now something happens. Covid against social media. something happens that endangers accompanied. There's no manual on the shelf. So you have to have smart capable people who are able to figure out in pinch. What do we do. Because we don't have the weekends jake about it. We gotta figure it out now. Seems like the prescription here might be that everyone needs to read anti fragile again. And that's sort of the mindset that you're talking about does it follow that the most important thing then is culture. It seems like that would be the playing field. May be to build a resilient or even anti fragile organization cultures. Obviously always important. But do you think it's even more true in light of everything you just said i do. I also have to say. I think antics fragile is a really interesting model in philosophy and certainly in a vacuum is smart thoughtful. All those things. But yeah i have a lot of friends. In commercial real estate with long term leases on class-a buildings and everything else. They thought they were in an anti fragile business. I've always looked at the anti fragile thing instead. It's anti fragile until it's not with things that happened. You lacked the imagination or the creativity even come up with. I think that you certainly want to try your best to build businesses in that way. But i also think that there's usually not a substitute for aptitude than at the end of the day. People that are smart and capable and thoughtful you marry that sort of experience plus intellect plus imagination and then the ability to lead the ability. If you're running an organization to have banked enough credibility with your investors with your employees with your board to be able to say okay we're gonna make a sharp left turn now into have the credibility to carry that through. That's sort of leadership that i think you're looking for. I'd love to turn out to how this is actually played out in real time at tokyo. Starting toko labs so this is now again a common theme across the things that you've built as having this respect for tech in data but also isn't now deliberate centralized asset that can be deployed on behalf portfolio companies. Does that look like walk. Us through toko labs. Were the people that populate it were the key function in it like if it was just a standalone business. Just describe for us the thing that we tried to do in recruit for actual practitioners who had deployed artificial intelligence worked on teams and done things. In the past that you could point to at places like google places to sigma at places like amazon. And sarah where it wasn't just hey we're not here to write white papers. We actually need to the win. Had a real set of problems. Build something ineffectual. Wait now you're going to be weighed and measured on basis. So that's how we recruited and that's how we want to conduct ourselves so we also don't have a huge portfolio of companies. Just we're trying to do small number. Highly concentrated in house efficacy when you're looking through new businesses to potentially be part of the toko family. What gets you most excited like. What features of a business. When you're exploring for the first time makes you sit on the edge of your seat. Most i would say it's a combination of a great management team but a management team that is really to actually use technology in a way. It's not just sorted surfaced but is part of the dna of the company because without that. You're just fighting an uphill battle constantly. The second thing i would say is the industry is big enough that if you're successful does it map and then i think third thing is a company that already has a good business good business metrics the right sort of saying look at and say. I think if we were able to do these things it would enhance the returns and make one plus one colts have those are the things we kind of look at in combination so its management team. Not only great what they do but embraces this road signs of industry is big enough to natter. And if there's a very clear wet itself the table if you can't articulate that you can't just say hey we're going to go in and bang on keyboards and make it more valuable. It's much more complicated than that. You have to be able to see that through. We studied the insurance space for years before we finally did a transaction. Are there non obvious things that you look for when you think about quality of the management team i would say it's a couple of things. What sort of expertise to a house in the business. They're in plain old fashioned intellect. As i mentioned earlier to leadership qualities. Can you lead an organization not just have the title able to feel when you walk in the room your organization that people truly look at you as a leader. I think that's very very important. I watched the attribute of folks that have conviction but are intellectually curious and willing to learn things and to truly have an honest conversation and debate and then hopefully emerged in that room with the united point of view. And now i think part of it is that grit and determination because there's going to be a moment where something is really hard. Nydia even looks insurmountable by the way. ben horowitz. You wrote a book called the hard thing about hard sayings. One of the best business books i've ever read and that's one of the things he talks about is. There's always a way but you have to have the resolve in the grit to not let rallies find. Its way into your system. You have to be creative thinker dynamic and do have that grit and resiliency that when other reasonable people quit you keep going signed away way. I think it's really hard to measure that until that moment is upon you but you least want to see signs that that capabilities. They're having such a unique history in business but also unique perch today with the holding company structure a lot of flexibility a lot of experience. I'd love talk a bit. About what has you most excited about. The world and just writ large and what has most worried. Maybe we'll start with words. We can end on a high note. What trends are happening that you're watching that you think could become damaging or bad in the years to come in light of this incredible sea change in technology business the world kovic etc. I'll start by saying that. I am an optimist. Does you can't come from came from and not have a sense of last full optimism but at the same time in my adult life. I've never seen so many systemic challenges that are real and tangible. Obviously we're living through covid. And i thought that there was this moment after nine. Eleven where republicans democrats. Everybody came together on steps and had that moment of being united. And i thought jeeze cohen vocally has the same thing. We clearly have not seen that half but when you take a step back and you think about the challenges of climate change which are real. And i think unfortunately our accelerating i think for some reason in our country math and science have allowed. The united states take the global leadership. There's many factors but i would argue. That technology in science is certainly on that list. I look at the challenges that we're going to have in. The workforce is sort of the technological world continues to progress in some people. That would challenge. Whether it's student user bad news you're gonna have a lot of displaced workers and i think there has to be sophisticated honest conversation. About what the implications are going to be. I think it's hard to ask a sixty year old truck driver to learn how to be a program. I just think that there's a little bit of wishful thinking around some of the solutions that i returned and i know that's going to be an issue. I think china is certainly an issue. And i think that the united states both needs to be a good global citizen and at the same time. Be very clear about what we think. Changes need to happen. Where china needs to be held accountable. So i think that's gonna be a very big challenge. We're not in a great place on that and certainly is i think about the implications with china on artificial intelligence cloud computing etc. These are zero sum games in. If we lose that race. I think the implications of being in second place are profound and will impact nal global standing but eventually our way of life and then lastly i just think about the resiliency again. There's that word in the united states. What made the us a very unique place. And i just hope that we learn that. Civil discourse is a part of what makes this works. And is we get to a place where we can only shout at each other and your inherently evil person. If you have a different point of view than i do. I think we're in a lot of trouble and i also hope that there's some absolutely necessary and long overdue social changes that are taking place that are important in forgiveness is also art of our society. I'm an optimist. But i think there are challenges ahead and i think again the second and third order of faxes covid when we emerge from this of yet to be. Imagine your experience. So i just think we really have to get through this and understand that we're gonna have hard choices hard conversations and everybody needs to do their part with that. Those are tough things. Let's close with your optimism so you get to see so many interesting new businesses existing businesses cultural trends etc part of the media landscape for so long. What has you most excited. What possibility fresh possibility is most animating to you today. I would say as much as everybody likes to sort of harsh on the young generation in work ethic. Get it entitled. I have to tell you i- privilege of either lecturing nat- or being around some of the finest schools in our country in the aptitudes capabilities of this next generation. Their twenties just blows me away if you think about some of these young folks that a- get are coming through. Covid are not digitally fluent but butter thinking about things in a completely different way. I think that gives me tremendous optimism about the future and also never bet against the united states. We've talked a lot about business lessons that you've learned across your career. Are there any other lessons beyond business that you're most proud to have learned that you'd be willing to share with those listening. It's the end of the day. And maybe this is our sherwood coming through twelve in some of the isolation is in the comes from that is that how precious time is no one out there. Listening is go. Say i never thought of that. Because it's kinda cliche but there are still many parts of life where you're doing a deal. You run into the next thing. When you are staring at your. Life's what are the moments in people that matter the most. And how do you truly flip things in the right place so that we're all still working hard and everything and and the same thing like everybody. I'm sure i lost very close to the over this past year. I try if there are people that are important me. I try to make sure that. I tell them that. You know you run through your life and especially in the digital age. We don't think about the expiration date but there certainly is one. So i just think that spending your time in a way that is meaningful to you and spending was that is meaningful and letting them know that those are little things or big philosophical things that i've learned while surly remember this conversation for maybe two words adaptability and dignity the ability to be in the game the in the mix and work extremely hard towards a goal. The adaptable along the way and to do so with that quiet dignity that you talked about earlier i think it's such a powerful and ultimately fun combination life short and should be fun too and the importance of relationships. I think you know my traditional closing question for everybody which is to ask. What is the kindest thing that anyone's ever done for you. I have to say that there are so many different answers to this. But i'd have to say my uncle. Jim who helped my mom raised me when i was young and shelton aptitude and sports so rather than a single event. He was a blue collar. Guy worked in a factory and but had time for me weekends evenings house when things broke which was constant in just reflecting back on everything that she did for me growing up consistently without sands fair. I love the answers that are just family oriented and with kids and stuff like that. It's a great place to close. Thomas thanks so much for your time. This has been great. Thank you this episode was brought to you by vanda. In this five part miniseries i sit down with fantasy yo christina kakapo to hear about the origins advanta how is automating security and when companies should look to partner with fanta in this week's episode christina and i discussed the use cases for why customers seek to work with anti and how christine knew advanta had product market fit as you think about Stack ranking that. You've seen so far just from your early success as a business working with lots of customers. How do you think you would stack rank the jobs to be done that they are hiring fanta to do for them in some sort of order not exact but just sort of like an inventory of why you think you're being hired. I think that will help those listening. Like if this is something relevant for their company understand the major reasons why affirmative approach fanta. There's two big reasons why people hire fanta and we look forward to serving them. The first one is opening their startup. Get more secure often when you're smaller starting out a big piece of that is just determining what even that means. They're having a prescriptive guiding hand. There has been helpful and then when someone is more secure helping them prove that they're buyer Compliance certifications the sort of alphabet. Soup comes in and saying like hey you have the security that's great. Let's let's help you use that to widmer the grow your business user angle here of like a moment of insight that you often see from customers when you're engaging with them at whether that's the cto or or some other engineer like is there a is there an aha moment that you often see and if so what is that is actually in the early days before i was just starting to sell in. Didn't quite know what i was doing. A demo on the first call and then got feedback that no one actually believes the pinch and then they saw the devo then that i could actually see their life light up anyway so i learned to do the Was but to that end. I think it was just our main dashboard list of things. You need to do and a list of the things you're already doing. Sort of the early design read. You have done green you've done. Just that prioritized list really made it. Concrete like oh to do these things. I get my compliant music quickly. If i do. I'll approve security posture posture game on. Let's go. is there an early customer story. It could be the first customer or you pick. That stands out in memory as like the the moment that you felt you really onto something. Yes actually so early early before they are still sort of running what's now vanda out of spreadsheets. Because we were. We don't want to build the wrong things we did. A lot of spreadsheet prototypes in early one was just writing down this list of controls all the stuff company needed to do going and talking to engineer and then handing back spread does. Here's what you told me you're doing not doing. Did this for two companies early on to test. Could we fill out the spreadsheet the spreadsheet similar all of that sort of testing turned out we did make spreadsheets companies. Who are happy with them. They were pretty similar. That'll felt good. What felt great. Was we got an email from an old colleague that basically said. I don't know what happened. And how you became a sox. You consultant super weird life decision. But can you come into this for my company. Also let me know if you wanna get a drink and talk about life because this is weird and now is the moment when you're like all our spreadsheet with viral compliant for like. This might be something here. I love it greater really start. I love those things. I also love the spreadsheet product i. Everyone says do that. No one actually does it. Ask him to be a smart way to build. It is because it's so much easier to add. Change rose thirty spreadsheet than it is towed. If you enjoyed this episode checkout join colossus dot com there. You'll find every episode of this podcast completely transcripts show notes and resources to keep learning. You can also sign up for our newsletter colossus weekly where we condensed episodes to the big ideas quotations and more as well as share the best content. We find on the internet every week.

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SaaStr 441: The Top 5 Mistakes Scaling with Monday.com with Co-Founders Roy Mann and Eran Zinman

The Official SaaStr Podcast

17:56 min | 4 months ago

SaaStr 441: The Top 5 Mistakes Scaling with Monday.com with Co-Founders Roy Mann and Eran Zinman

"This is sastre founders favorite series where you can hear some of the best of the best from sastre speakers. This is where the cloud means is getting compliant with a sock to report. On your company's twenty twenty one roadmap vantaa automates the tedious and time consuming process of collecting evidence for an audit. So you can get focused on growing your business. On average vantage customers are sought to compliant in just two four weeks compared to three to five months without fanta learn more and redeem. Ah one thousand dollar off coupon at vantage dot com forward slash. Sastre up today our top five mistakes and scaling with monday dot com featuring co-founders roy man and iran's inman so money is essentially a platform that any team can manage pretty much everything we provide for lexical very dynamic building blocks. They basically allow you to build whatever you want. Whatever makes sense for us a company. People build unbelievable. Stop on monday. We have clinical trials research people building airplanes construction firms architects. You can build your own process and manage the team the way you like to earn scale. You need everybody in the company to make decisions ahead of the game. How do you pass ownership to people that they feel. They make an impact. It's very important that everyone will know what's happening in the business. Otherwise they wouldn't be able to help us drive it forward in the office. We have hundreds of dashboards showing every metric. How much money we have in the back. A are new. Sign up everything. You're going to see a number as your metrics. aren't you afraid. We're better than then they're going to be scared to that and they've got a problem and it's not the dashboard so just to give you context about us as a company before we dive in so we're platform that allows everybody to manage any aspect of their business from work management imagine processes to project management. Crm agr whatever processing might have and we're very diversified company. So as you can see we have customers that have anywhere from two people within the same account to five thousand across one hundred ninety countries. And i think something that's very unique about money. Dot com is the fact that we have customers over two hundred different industries which is a great thing but also kinda complicates things and and kind of the magic behind our platform and another interesting fact is percent of our customers are what we call a from non-tax organization so really abroad audience and you can see the grass on derived which represent a revenue growth since two thousand and sixteen. Been quite a ride. And i think this is why we thought this is an amazing opportunity for us. To sheriff five things we would have done differently or five lessons that we learned we now have more than one hundred ten thousand customers using our platform more than six hundred fifty employees across multiple offices in tel aviv. New york london sydney san francisco may abby. So this is reading not chill about us as a company and let's start so mistake number one is don't only focus internally so positive side we always try to look internally and can understand What we want to achieve But i think this is both a good thing that we have as part of our partner shape in the company but also if in To make mistakes because we were too focused on ourselves of the company. And this is. This is kind of I think also kinda something that people. Ceo's or any any any founders of the company kind of feel that the company can succeed in into the day to day. And it's very important to go outside and get other stupid perspective so i think this is something that we haven't done in the past. We were very focusing. Tony and i think as you know wolf of our character is also always gonna try to find answer as ourselves so come with the answer is we always take ownership and try to find solutions but what we found along the way that you know consulting with other people and get it after effective been. Learning from others is very important. I would say one thing that we've learned is always trying to understand when people give you advice What background are coming from. Because everybody has their own experiments. If somebody is looking for advice for me. I always say this is my experience because i've done. Xyz end this war give you this advice of the people have different experiences therefore advise a friend so we do try to kinda keep debugging As of prints that we are know the reason behind the device in why people can came up with this conclusion the just learning that and getting their suspected is super valuable for us as a company. And now you know we consult with other. Ceo's other cfo's the leaders in the company's perspective. It's something we haven't done in the past. And i really chill. It hurt us in several occasions number two. I would venture in say that. At least for whatever i'm passionate about i live like Be in my face the because you like doing something he'd secure might be good at it. Okay and then you. Don't you have other things in your movement and because you were good you you keep it to yourself. You're you're not moving forward so we have. I think in the moment. I think and a lot of ample the blew up in our faces. Them like one in the beginning was the product sales which we look Both around and i came from this background. This is what we've done our whole lives building products and we. You know that part ourselves and it was really hard for us to go in the way that we didn't really know how time and we understood there. Were the problem like we think about stuff that should be done. We have it all in our heads but the process is not there. People don't really understand it then. We can skip the team that quit so over. Time became in the beginning. We could do it while over. Time became not so great and because people were of our tied more of our efforts to understand other than that the man became bigger than we could ever fulfil them on the same thing. We had other stuff to any so we haven't been done and so we've made that change and added product. Maybe we'll talk about kpi's in housing and other be mistake. A person one of minds. The we love markey and i did a lot of of that in the beginning and as it grew complex actually excited like i love that the more because it's like really an amazing world of how their early stages of user with your product drive the early beginning the understand what they don by the product and what. I didn't build a lot of extra structure in the team. Love other areas. They're really true. Good management and you know we pay the price for that. Took me why to understand it. Because i really liked it so much so wherever you enjoy yourself and like and you know when you feel bad about something you'd go and do the msci roy baker from might be a baby. Okay point number three That ray and i learned a mistake wave done a just because you have leadership doesn't mean at leadership leadership team so a few years ago. We kind of started building our leadership team and we hired a a lot of great. Vp's and every one of them was super talented on. Its own but something that we kind of discovered along the way it that it's not enough so it's not enough to hire super smart. People excited not greg leaders. I think the most value that you can get. It's when the team is working together. And i think you know. Founders in the beginning of the company are very dominant In terms of setting the direction and people follow them. that's okay but as the company. I feel kinda founders need to take a step back and give more room and build a true strong leadership team and when i mean by that is a leadership team that can communicate within itself. They can so sold its own problem. That helped kind of big data strategy. And how we get there and the stronger. I feel the stronger that you can build the team and make it successful people work together the stronger you become the company and i think that for a very long time waiting do this properly so reunite Kept being the way different leaders connected with one another. And once we understood that that we were becoming a bottleneck that we're becoming a way to people to communicate and solve problems or kind of moving forward. We decided to make a change and we can step back and kind of improved How people work together. And i can say. Now it's totally different leadership team. Same people Saint quality but just the way they communicate the way the push the company for and being super valuable for us in the company. I i would actually add. Although it's a management team is works. Different than than a team of each one has their day to day separately from the group. That is a team. So it's like took me. It's the why to understand these different kinds of team management of these quietly wi. Everyone most of their dave are not with each other and regularly gives most of the day is spend with each other so a different type of they not make any different to get to the same point of the run may get to the family. Teamwork unique to have different tactics Different way that workin pauken meet and worked again okay. Bye goats this one. Short of a gives the example before the product so for us leading by goals or by five or by an objective of his career for a rule. His success is key. Why because it allows us to take a step back to confident about it. So this is what happened for us in the project. So was Roscoe having great you is to have a great experience to have everything in a way that we understood them how to be a great products but then on the escape the team which the same levin how do you get the confidence that product say the same so a during the flood. And he's a few. All stuff was important for us and once we understood how big the goals for the product and a came in term of kpi the for a certain area we know and worked a lot and tweet prove and know that everyone is aligning towards like furred vamba on board so wanted the conversion boarding to the product and the people succeed with it. So is katie. I would sign up letting you can argue that scored at. You're not just forcing people to stuff. The is your guys that say three days down the funding. Make sure they return that. I say okay buddy. No one can that he would have to. Users need to get revenge to come back and actually start and then once you understand that you're able to let go and give people the freedom to experiment even to the point we got but they did exactly the opposite the fort we thought might be but it doesn't matter. I knew but the caveat we said together was going to tell us the truth and guess what like a lot of times like updates right than a lotta steinfeld drums and and people thought of doing our faces. I wouldn't say of and it gave us freedom that we we gave people the freedom to experiment and try things when they know that if they succeed we both learnings from the market itself. Not by what. I think is right or what someone else's right so that's important for us in that staples defining. Api agree on the success on what these success is crucial. It's not just like having. Kpi new read saying that most if the number moves up then we agreed this. The success and for some areas took us like two three weeks to even get to something. We needed rian narrowed them. And that is the key that the goal is set for a kpi that you trust to be a success and then you can safely. Let's go to our last mistakes that we we managed to squeak into the site I think this is. This is a very important as you. Scale maintain a cultural concepts feedback. I feel that for very long time. We we use different methods of gigging feedback. That wasn't very effective So we had feedback talks but once every six months or once every quarter which is great. I think when we always had one one on one meeting on all levels in the company was very important. But i think something that we didn't build in the right way in the past Our company is people giving other people concentrate back. So let's just finish a meeting. You have feedback for the person who presented or somebody else you know. It's very important to give the feedback Soon or A few hours after the meeting or did they asked her. Because you know it's fresh people can relate to that and they can learn and i feel that We didn't do this enough of the company and not giving feedback and people not Come a hearing what they need to hear. sometimes leads to frustration or people feel like that they can cannot comment on other people job or behavior so i think this is something that was very important that we changed. And now we give constant feedback on a daily basis We still have the performance stocks every every quarter every every you know but basically it's no surprise because people get concentrated bag. They were standing. You know exactly where they are. And i feel this really creates a culture where everybody feel open to to one another. I think one very important thing is that i myself have the manager. All managers asked for feedback practically. So it's not just going to give feedback but also asked for feedback because once people feel comfortable giving you feedback. Also getting feeling comfortable on getting feedback become very important part of our culture that we didn't have in the past and definitely wasn't a state that in laos to move as fast as we could vanda makes it easy to achieve and maintain sock to compliance. Automate your security monitoring with banta and get ready for a sock to audit in weeks instead of months learn more and redeem a one thousand dollar off coupon advantage dot com forward slash sastre again. That's vantage dot com forward slash sastre.

vantaa Sastre roy man roy baker tel aviv abby iran pauken markey sydney san francisco Tony london New york don ray greg Roscoe levin
S2E21: Dr. Fred Luskin: Director of Forgiveness Projects at Stanford University, and teaches classes on The Art of Happiness, Meditation, and more

No Ego

59:05 min | 2 years ago

S2E21: Dr. Fred Luskin: Director of Forgiveness Projects at Stanford University, and teaches classes on The Art of Happiness, Meditation, and more

"This is the no ego podcasts where we ditched the drama and entitlement and transform your role place. I'm signed Wakeman. In this episode of the no ego pipe cast. I get the opportunity to interview one of my favorite faculty. Members of all time fed less skin. He teaches the happiness class at Stanford University. And he and I get together we talk about choices that lead to happiness. We talk about grieving for giving. We even get into a conversation about venting. He takes it to a whole new level of sophistication in answer. That question is ever. Okay to Vantaa hope you enjoy listeners. Welcome to another episode of the no eagle podcasts as promised in series two. In those times. I can get personally connected to one of my great teachers. I will bring them to you in. So imagine I'm at Stanford and I'm getting to work with. Some leaders in their healthcare system and familiar voice is onstage. Right after me. And I love the message. It was brilliant. And then I realize that it was who I call duct to Fred, Fred, less skin. I couldn't believe that he was talking then. And now as talking to us so welcomed, Fred, I'm so happy to have you and. You have just wonderful credentials. I just want to mention some people know who you are mine you're seeing is that you're still the director at Stanford University of the forgiveness projects is that true. Wellness education, Stanford, I I've been working in modest ways throughout tra- twenty five years year. But. The we we think recently able to. Offered to undergraduate and graduate, swallow the campus wellness classes on meditation and compassion and emotional intelligence. And it's a wonderful addition to the the handy stuff that is taught here. In our our talk of while our talks were both helping with a conference that looked at resilience in ways in which people can ensure that they respond in ways that don't lead to burn out in the workplace, and one of the things I think you really drove home I loved it was just some of your understanding about happiness. And I remember when somebody I said to me that happiness was a choice in that suffering was optional it took me a while to understand that. But you do some wonderful working in happiness. And so are there any big secrets in the life hacks on Huddah had get happiness for pursuing it. And I like. Weasel wheedled away to be able to teach a happiness classed undergraduates about ten years ago. Says in terms of a human being. It's one of the most important decisions we make or don't make. The mine has a whole pint of setting which is at survival and problem solving and disaster prevention. But actual happiness is not a priority of our basic survival at all. And if we're not careful we go through a day very much in survival mode and then. Maybe just accumulative mode, but rarely in like happy mode and the cost of UCLA work enormous sum. It's shocking to me sometimes living here in Silicon Valley to see such wealthy. Successful educated. High-powered people looking so Aram looking so harried rushing everywhere. And it's not happy and. A waste of human potential. It really is a mess. It is interesting to me is I work in healthcare. Or just what these amazing brilliant leaders? Is. You can't you know, it's not about smartness. It's not about this external things that you have. Because whatever I accomplished today we'll be faded by tomorrow. I mean, it's just this really constant life of of letting go but happiness. Just really alludes people and yet. You think preach that you can it doesn't have to allude you. It has to become over one's life. Like the north star. You know, it has to be come your guy. For some people. It is some relief that seniors older. People are happier. By far the middle aged people. Some of the research suggests that the pretty young and the pretty old but the happiest among us. Before they entered the fray of the workforce somewhat after but the qualities that allows older people of to be happier is they stop sweating the small. Because they recognize the time is short and that just no purpose in impeding every battle and most of us younger than that. Don't do that reflection. Don't recognize that there are things better less just ignored like again, a co worker who isn't saying everything you on every decision. The bus makes your dog like or even work situations that change with your mission. If you don't put happiness somewhere on that venue. Just gonna react each of them as regular repetitive stresses and keep us bound to an adrenalin back system that has very little wiggle. Very well. Sad in a we talk a lot about stop judging which is kind of put perspective around and in in start helping in so. I think one of the choices that an you talk about this that we can make because happiness is default setting is to see everything from kind of a world of scarcity and judgment at that low self, but one of the things we can do one is put things in perspective. But to even go the extra step in look for the good in situations in people actively is that something that you have found that contributes to happiness is that action of tackling up and looking for positive. Looking for the credit is. The nobler casks of human beings. We can train minds I practice. Some of this myself. I've seen effective other people. We're never going to get rid of our negatively and our threat and fear. That's really exists for protection what we can. Call to is alternatives that exist side by side. You walk into a room where you don't know anybody it's natural to feel apprehend ship, you we have a thousands of euro brain decide designed to is it safe or these people late made will they have my interests at heart, and my foreigner difference. Whatever is also a threat bekker's. If you pay much attention to the mechanisms e feel Lauren and combative, and you know, that that you're on edge. That's not going to go away. But you can train yourself also to look for commonalities nice gestures appreciation that they offered you. These are these are simple patterning. So we can do to look for. And then the negativity your fear has some competition in your mind of what it is you want to pay attention to. And what information you wanna use to guide your life? I love this. Like, you get a choice back in one of the things since I heard you talk. You reminded me of he had taught me this before bed. When I'm noticing all those just that hard wearing of stress indicators, I really get it down to. It's only me and that becomes against you. There was no us in really the great things happen when there's an us when I can find either that connection or give myself a choice that there's not just lack. There's also. Some goodness. I'm saying the freedom to choose between the two, but there's something you said about when it gets to be me verse. And I lose the us that day. I know it's hard to remember when you give these patients all the time. So powerful. I mean, it dreadful purpose. To motivate you to keep your full attention on a problem that that's what it all of this for. It's a it's a primarily focusing tool, and that focusing tool make sure that you are alerted to the problem that is in front of you or is remembered. That toil makes it very hard for people have any sense of us. It's very primitive individual base bible. You know, some people are able to, cultivate, of binding in that time sitting they have a little oxidised or other chemicals in their everybody has that threat mechanism wire. That can be trained that can be trained to also that you can go through your day. For commonality with people. But you you can see people in say, oh, wait a second. You know, I have dark year this person is blood. They're different than. Or you remind yourself what we both have air or sure we both want to look good. So we put our hair in different ways as we have different inception of what they'll be good. You can meet somebody if different religion, and you can focus on the differences or you can say, well, look what both trying to find some transcendent. Meaning in the slight when you're at all, it's just the expression of it. But these are happened speck of of. These practices during the day is even more importantly, these are probably some of the most critical stole to bring home with with each of us to be connected to end kindly towards our family and friends agree. I think it's so important one times in inspired leader. When those ideas just come to you don't know where they come from my head to the people who were might team, really focused negatively another didn't know what to do. And so in the moment of exasperation, I said the two of you need to get together. You've got twenty five minutes come back to me with a list of a hundred ways in which your similar in in the beginning. The list was really, you know, we both have ten fingers. We both have ten toes a hundred and then they really got to that point. Like we both care deeply about providing for families. We both are passionate about their work and in it did just that. Just in that moment, though, small miracles that happened with the change in perception or perspective on so looking for commonalities is one habit. If we had the cliff notes from the happiness class that you teach at Stanford. What are some of the other habits were think you might of called a meta decisions we can make during the day goals to be happy. What should I be doing during the day? The commonality. Is important another important one. Oh, simple. At the cow, simple cure is if you catch a disease. It's really not that hard. If you're in jail 'cause you murdered eleven people and it's much harder to bring back neck. If I but one of the other things that I believe is essential is some self regulation practice. Some kind of grieving meditation prayer positive statement at formation visualization something that can be practiced for as little as like his came to thirty seconds at a time. To stop the nervous system from over accentuating the negative and the reactively that comes chronic. If you're not careful. Oh. If if you call in into work, and we're busy end distractive, which many of us are. In the nervous system of bills of Strath and also create some they coma slate debris from the distracted there. So if you're doing one thing that that default network is not quite as active because you're focused default like what's wrong with my life network at how could I make sure that I I, you know, it's like the the part of you that when you go to Hawaii remembers that you didn't clean the cat later. You know what? Anything you're doing? So one of the practices that is really a central that focus or concentration practice, which which is different than our our chronic checking the hone working on messages looking around like just our ability to focus this team compromised by all the attentional things that we have, but you can practice very simply, okay. On the take thirty seconds out. Just to flow may breathing. Or when I'm done checking my messages, I'm going to actually fully looking by Email. Four. I do something else is create a moment of transition where you nervous system. Get some break. Or I'm gonna you know amid in his apparent of better future. These are all relax Asian focusing practices. But you know, you can stop for. Will you actually have to image? How good it will be to come home and meet somebody I love, and so you get a little bit of built Amine in your system. But it's a focus in practice on positiveness. Besides commonality is number them. But some degree of self-regulation away you both quite nervous system. Now. More importantly, yet a sense of self efficacy today. You don't feel overwhelmed Annetta control, which is the worst thing to have those two people at work like they lose the sensor on Jarjur. This just like somebody running around title put out fires. That can internal experience with some self regulation practices and not as you don't you're Pioli. But it's not as bad the other. Besides just looking for commonalities -regulation. I mean you deal in healthcare at you'll little, but I into things and the inability that we all have to appreciate to start our staggering abundance. The minister. Say the privilege humping born in the United States of America. The the positives of having a minded mighty that work. There are so many things to appreciate. And those are the simplest wants when you want to take that even more deeply you start appreciating other people. And then you win the commonality and the gratitude appreciation become sinner, just an income becoming credibly powerful. So one, you know when you walk into work. It's really good trimming of job just just that. And hope for them. If you buy dinner to be thankful for happen to work at a place to give you dinner or lunch. That's that's credible bounty. It suits. Who would I someone I work with folks is the eagles really good at dismissing the buried things you've just suggested like self-regulation practice or intense granite intentional gratitude, or because the eagle wants to live and these things, you know, will really change the fuel you're giving your brain like the ability the know that if I can just self-regulate for a moment, I can tap into my own dopamine source just became away where I was like this is amazing suffered. I think when we're in in an ego lands were seeing the world to ego. We diminish this. And you had a Stu just a simple exercise. We all need to go into just they act of not being near our phones for a few minutes, and they act of just envisioning ah positive future. I mean, you literally could physically feel different in it took a few minutes few minutes. So I really want. To inspire people to dig in. Go ahead. Sure. Home. What the purpose of the ego is. And the purpose of the ego is to make sure that the the self identification. This is me, and I have to protect me, and I have to promote me, those are all true statements. The purpose of the ego is to create a kind of. Person around that me protected and the energy. That we all decision e-, you know. So the eagles job is to make sure that experience creation is successful. So all good. The question comes what happens when that job is not that well done which happens often. Was the ego alone is not sufficient, you're what it wants. I mean, it's great at promoting the self and getting that most. But without other parts of the character and personality come conservative almost always fail. Szekely over us. That was I think as humans, it may be part that makes us human. It might be something, you know, that we have in Evelyn that other species might not have. But I think we got so enamored with it that we you. We overuse it. And there's so many other ways of of knowing in experiencing the world, so. Yeah. Coming from a psychology background is like the ego has a purpose. But it shouldn't be the default lens in what I like to have people do just understand the lens. They're saying the world through to make sure is that they're able to move through the world with all of their intelligence, or they can love somebody with all of their intelligence instead of just that, you know, survival instinct, or whatever that may be side love your ear clarification on that. If you had five egos out there. Nobody would pass the ball. It would be no like help defense. And where in exactly that situation, which is the EKO perspective Asenjo. Necessary, but not sufficient that necessary, but not sufficient. But when taught that you know, that would be me that would be one of the really useful things to just remind people that you have this ego sense that you desperately need. But if you only rely on it's going to drive you off, you know, it's gonna take you around. So true. So true. You know, a really in a follow up on this podcast with some great links to some of your talk on happiness and in other things because I think that people don't realize that if your goals happiness. There's decisions you need to make throughout the day that than support a movement, you know, consistent movement towards that goal where people get derailed that ice him, especially at work as when all of a sudden lake. They get caught with a grudge towards some day. Like, it's not just a an issue that happened, but something they can't move on. And ultimately or some of those things that people feel that happened to him that completely derailed their life that they have a hard time forgiving people about in. I know that is some wonderful parts of of work that you do research. How do you move through a grudge like if I want to be happy, and I'm working intentionally to be grateful in see come nowadays. But gosh, darn at I got something. I just can't let go off. You know, when I first started to happiness. Forgives us twenty years ago. The the two ways that were open to me to do. So or one that it was good for physical health. And that's what got a lot of publicity and a lot of interest because we research that forgiveness was good for physical which seem like such a does to me. Remember, all these like, you know, the New York Times would call up, and I'd say, you know, I walked into a second grade classroom, and I said to the kids. Okay. You got one group of people who are the another group of people who are who. Do you think hard? You gonna be in better late the euro's could easily forgiveness. That. But the other way that was one of the ways that are were separated from other forgiveness work and helped us become more established was I set at radio print. I, you know, if you wanna be happy you can't be better to their musically. -clusive? But it's like a GIO. That almost the same thing. But human beings are. So. They're so protective of the cell. They're so limited in their Persian of us usually their vibe their family or the people who are really with them. And they're so resistant to kind of flexibility took all the lights on. On constantly creating. Insight their head about so many things. That is a recipe unhappy. In so many times the. The obviousness of that is really loss on the person a make you can keep this grudge. Let's play that out or you can let it go. Let's play that out and people keep the grudge to make sure someone else offers. I'm like, well, no, I think if you keep the gradual suffer with I let it go. Then they're off the hook like or if you let it go you're off the hook. And it just seems like people start to do some pretty interesting irrational reasoning, if we're non reasoning in that process, you know, I. I'm familiar with Byron Katie, but love her, and she, you know, one-time taught me that true forgiveness is when you realize that what you thought happened never really did end. If you inquire on your story, you probably can unravel something down to the facts in the facts of just as neutral face a lotta times, I haven't needed to forgive anybody. Because once I really do my inner inquiry were can giving benefit doubt. And I realized that what I thought happened never really did. There's so much freedom of in that. You know, I I love Byran Katie stuff and hers, his poverty, the Simplifier Avia work that I. But that could kick your piece of I haven't found that mobile. Well, I. Verity of the offense. Dependence on the situation. So Saliha point well taken suspend on that. Like, if your you're talking to somebody push married, and you know, they're Parker does some meat on night in the other or. Absolutely nothing really have been a lot of it is. The story you're telling you, so. In your like arguing with reality. Now, I we don't we? Enough situation of just horrible bio. Unsuspecting violent hug people or group violence, and I I know that that is true ceful, it's a outgrowth of the stoic philosophy. You know, like his just what happened, but your opinion on it. And that's absolutely true. However, what I think is even more true for at least really strong impact justices from our accounting system as a human being is the necessity for grief. And when people are given appropriate time and support degree, would you? Incurease and miserable. Angry and frustrated and wondering what the hell's wrong with the universe? I believe that too is appropriate essential as part of the DP ailing process because if people are honest or say at some point in time as the healing as the grief goes on at some point two time, neck, we either resolves or remains out stipple. It's at the point where the revolution would be helpful. But it's not there. Byron katie's were gigs and time. But if somebody tells me that their kid was shot in a neighborhood at three o'clock in the morning, and they were delivering pizza. I would never do that. I work with them. Really appreciate I'm happy. You jumped him at that clarification. Because as I'm saying for my own personal experience with a lot of gratitude, I was thinking more about the grudges in office stuff, and I had massing Kip on the podcast, and he talked about trauma and as therapist. I'm so glad that you. Help may remember to differentiate because it's so so true when we get into complex in big US scrape, and at some point after all of those feelings, you do get faced with a bit that there's a resolution to this. I do have some choices to make about how let it define me. But that certainly is premature until the whole process happens of, you know, those those this real feelings for me just to declare by that feelings that come from a story, I made up are very different than from those visceral feelings that come from significant trauma in loss in just appreciate you. Connecting. Dan, Schick -nificant, let me let me help you. Schrool little awesome. If if you know, I'm not trying to patronize you just, but if you think of like a work situation, right? And let's say somebody is all to somebody else. Now work. And you know, half the time it has nothing to do with the offended person. The person who was awful either suffering themselves distracted or corrupt or they didn't mean it. But if there's some situations where they would just nasty what I think is healthiest is help people like wacky CNN is that they have this Wayne Joe emotions in the each of which is appropriate, but it different times of what different intensities. So there's there's a there is a procreate anger there. There is appropriate self pity. That they have uses. So. Somebody's cut off in the freeway weight. And this is an example of that. It's fine gives them the Famer for fifty per five seconds recognized that's enough. And then move. There is some value in some great of expressive as of frustration of all the rebellion. One. Whole range of emotion active. Wonderful aging for people the use of a motion, but three generates like self confidence. Even when things are bad, generous, spun which emotional experience, that's prob-. Brit. I love the end in there. I love the ends in there. I think. One of the things. No, it really it really does one of the things I try and sort out insert out for folks. And it's hard. You know, even just like a one hour presentation is that. You know, for me, I believe that denting which is how you try and keep feeling alive after it's no longer appropriate that a Bentinck process for me is in helpful. But what's the first visceral feeling in? How do you express that or acknowledge it or let it let it be there for you? And what the balance is important. Is you just give me a contract? I really wanna think more about that. It's like feelings happen. That's the pain sufferings of it optional, but there's intensities that change. According to situations that need to be appropriate. Also timing of those in time, you're with it and the time that you're expressing a it takes two more sophisticated level. So. The really important. Millions quack. Bring into workplace is like. Cultivation remembrance. Thank your love. We. Remember that we've been loved we are. That we will be loved. We are negatively affected by difficulties in our day-to-day experience like the more security the more of secure attachment that we can create for so the less vulnerable. We are the normal interpersonal though. You want to cultivate, relationships that you can rely on to process stuff. So if you have a workplace friend, which is one of the most important things to do a work is yet support and colleague is terrible. Then if is so helpful if you have a wheel friend to be able to talk to that friend or to say to yourself look upset by this. But I'm gonna go home gonna talk over part tomorrow, we'll deal with it. But if we don't fail those boats EMA and able wariness of are connected this and relationship in our data days spurious, we are so much more vulnerable at so much more prone to react with anger at of our here than if we practice coach of Asian of belonging in positive. In heaven as people in your life that will help whole space for you know, as a as a counselor. I've worked with people in work with my own kids that getting that support. There's some appropriate ways to do the NADA appropriate ways. Because sometimes what I see is people have someone at work, but the work they do together in the support is more just really kind of Benting in viciousness rather than sharing feeling since. I try and help people understand the difference between I feel hurt by this. And I was surprised by it. And I I really thrown off by it versus he is such a prac-. And he does this crap in do is it is in resilience for different the type of support the way you're getting support you do you have some recommendations there, or is it all helpful. The reason I said it's because a lot of people I try and say you feeling sounds like this. But then tting sounds like that in in a lot of people will say, why just need time to vent. And what I I want to be supportive to them. But what I'm hearing is character assassination and story in in fury rather than just that feeling. Around the venting for civil. So if you say you, so I know that if I could too big to, you know, these two people again by chest, and I'll be okay that thing is fine. If what you're looking for is only people with you that your of victim. And that somebody else is a terrible person that will probably not do that much long term. Good solicit those. It's empathy versus sympathy. If I look for somebody that clued with me in building armies that's just going to keep that negatively alive, but having somebody hear me in ended with so, you know, what what do you think I could do next that would be helpful? I loved. That was the other piece when they looked at. It was some research that look what you horri- people who stayed stuff in difficult situations from those. There were two things. One is the people stayed stuck have done telling a lot of people about the issue. People who move through it here with a couple of close, friends and family so help bad happened at work. It's very essential to three or four people know about it in care about you. What is destructive is walking around defining yourself by on the one the bus shifted, and you everybody because of your identity, if you're not private with something with analyst since it's like, they can tell us then they can save face because it's harder identity. But when you tell everybody about it, you almost have to be the person who needs to continue the fight perhaps us what's going on in politics. Today rights is that we've got a lot of public. People who. Approach. Token vice? A less. Healthy approach reject it entice ending looted the advice as part of the indifference of the world to myself ring. So if if if you're winsome somebody head of bad experience, not catastrophic of catastrophic get fired if you get hired don't stop somebody from benthic. It's like you're gonna need then for a weaker tour. Among if you're really unfairly fire, you're gonna need that. It's it's part of the brain's reorganization to load of very new reality. But if it's a minor thing, you know, like the the older be or I have to work late or two people talking. I might back or you know, whatever growing minor stuff. And the most appropriate listening is here. The law. So the one thing or whatever it is. To make a simple cash to move. I think that's really good differentiator twin the severe trauma in the day to day. Most of what I am feeling is disrobing teams as the stated day this lack of ability to be mentally flexible and writing go and emitting on that the piles up as further proof. Why this won't were rather than a real sense of how it could work. I wanna be sensitive to your time. Friday, you nearing the end. So you can go teacher how you doin'. Okay. Wonderful. Thing that I really support what you're doing looking at is the canes issue. Maybe one issue, humans is the story. Tell. So no when you look fantastic you wanna look at the difference between people who say. My boss is a terrible person because he did this or I can't get along with my co worker or they're making me you overtime for the next three weeks. Then has a senior focus. Will be that harmful people. Oh, one that's a great. I didn't realize that. It's when it becomes the whole kitchen sink. But you think so that one is the Ben king that make people into a person is very different. Eight company because they make any were for three weeks overtime. That's one instance versus I hate this company because they don't care. Talk about the difference. Those I think I know that difference. One is. Making about some of these pardon. Situation. One becomes global. Ori- suffocate. Got it. There's there's no way. So what we talk about just with this analogy because it's really simplistic for people to understand when you're tackled down into what we call a lower version of yourself. I can't change anything because I can't change everything. It just really takes away any place, you could have impact where if you can identify something specific than you can continue the work, even though that's not your preference. You can find a different job with different shifts. You can get some coverage for those or make adjustments at home like they're still places you can find a place of impact in the world rather than the whole world is kind of stacked against me is that the difference. You look yet the personal attribution of the fence. Impli relating to difficult situation versus how much of might pass our many of might shoes and my bringing into contaminate the personal situation and the more that is brought in the less useful than thing is. This wonderful distinction. I think I think when we're with someone we care about we concertedly almost like kind of on a cellular level feel the difference. You know, one feels like this could be a really cathartic moment and productive in the other. Just feels like, you know, this was just a a tantrum of some sort that we were kind of held hostage to be part of. I mean, I just I think about two different examples I've been into with a personal cure about. And there's just I think the can even as the listener the person who loves wants to be helpful. You can feel the differences. And we're forgiveness say, no, that's way, you framed all this. Forgiveness is incomes over really important issue is when the natural briefing of either has been extended or hasn't been done or has become Chris several give and I think that's what you probably in coke when you say, so. If you come into a work situation, and you're trying to teach him to be to get along better. Be more productive and twelve people. You know, have a little had twat about how bad something is. And they've been saying that same thing. Now for eight months that's been thing is not good at all. It's of no you stand buddy. What it is is like a mythic constipated brief. It's like, you're angry your frustration your owner ability. And then you're stuck. Yeah. We're if nece is the antidote all the stuff. Creeps. Forgiveness is the antidote for stuck grave. It's so wonderful. Four Greeks know. There are some people who are either wake so spiritually of or have practiced so much like the stoic. Who's whole purpose was to create a mental philosophy when they in advance could understand what life could offer. And so they understood that painful things happen. So they creek we've amid somewhere. But for the rest of us, gracious abo- preate, and it has some time considerations. Not nearly as long as people think, but forgiveness is the give necessity for win that processed get stuck and get stuck echoes the story that they're telling the comes an impediment. And you will see with the kind of thing that you're talking about. They have shared story of dysfunction. Exactly you've named. Yeah. The necessity of forgiveness. So they can literally forgiveness. His so you can move on past your own story. I like the definition civility move on past your own story. Really all forgiveness is it's like you went from. Terrible story to a better story the event never change. And in that the grief lace Byron, katie's were Kamei is invaluable. Yeah. Yeah. I love conscious through so much. It could probably cut off a Europe cycle. You know? It's an MP people. Don't forgive at the right time become both bitter because they can't cope with their own life. And they lose efficacy. I couldn't Gill with this last to be so afraid that will have been again, or I couldn't work it out with this co workers. Now, I have to be a little more cautious with everybody, we think his on from all the things that we continue to resilience in in happiness. You know, because he isolates just all of those things that that are they really helps me because I think I've found that work really useful from Katy at a time where I had been be on some of the things that happened in. So you know, it was good timing for me to move into a different immoral helpful story. But it's a reminder that in about that too. You know, like when something is visceral relate is traumatic. He can't prematurely move people beyond some of the somewhere conspiratorial, bypassing in what stoicism what special bypassing, I can attribute their work. I can remember I number such good work. All my gosh. I feel like we could talk for a long time. I felt like I got my private tutoring session, which I appreciate. To try to cackle what income shales is called like spiritual bypassing in others, all the things. But we we we asked people like you really know what happens if you looking at with grief or injury can be transcended. Do you really know what happened, you know, the facts, which is different than just your opinion of how terrible was that. You really know what happened? So have you done it some investigation of both leaf spirit, and it's cost. The wants to harm would have to have you explored the range of of ocean. If you're just angry got some sadness to deal with if you just said, you probably have some angered to get such if you're scared what you probably have some, you know, anger or courage to uncover, but you would lease because healthy reef people go through a range of motion and may come out the other side, actually, stronger people. So and the third thing is have you talked this out with a couple of people in not kicking yourself and you not sharing with the world. But have you been able to process this with a small number of people? You know, if you have an ongoing awful situation, we have found that we can say that people have done most of that. Then we can push them without much hesitation stopping the bad behavior, stocking vending stopping this stopping that. And we can more assertively pushed them to health. I love that the formula for give determining readiness. I mean, it's really readiness metric those three dimensions. That's nice. That's a that's a cool ad. I love that. Because. The I think back to some of the counseling, I didn't some of the grief. Fork? We did when we were working with hospice and stuff and that super useful to just help people in your saying readiness. What do you know for sure? And have you fully experienced it? And you know, is something you're speaking out loud to centrust, the people in some private ways and have. Make us like down to a sample thing because this can involve a whole degree of training. But let's say that one if your coworkers says something unkind. So that grief seques would be that you actually know what he had. Did you hear it? Did you just react to what was on? Can you articulate them? Did you feel a couple of Shen? Yes. I felt his yes, I hope scared because maybe my job is threat. And I was sad. Because I liked that person. Just the simplest things and three. Did you talk to somebody? Like, did you share your frustration? When those three things I've been accomplished wishing things like Byron, Katie or also to positive things there's much more receptivity much more the soil has entailed. And people feel better about of because. And they won. They they can be taught to be a little more mindful of their feeling. And two they could be at the impressionable value of social support not to self-rule. Yeah. In that that feeling heard in in supported in healthy ways. Oh, I cannot wait to continue to dig into more. I know my listeners are big readers. And so I've got a tell people there's some great stuff at the greater good science center and your back. The Berkeley is the center. Great good. Good stuff. And be able to look for anything about me the books that actuate unforgiveness and stress on the is you is like unju- view two videos on my work. It's not hard to hide exactly. But forgive for good was is that with his culture gift for good or forgive for good is one of the bucks. He had. No you've had even prolific. But what would you recommend people who wanna buy books? Do. Get him searching YouTube for you. Good. The biggest selling forgiveness book out there. We just I can tell you we figured out a way to make it a little simpler than it didn't before. Oh, I know in its stress-free for good. That was the what I call the happiness book so stress-free for good forgive. Forgive. Anyway, go thank you. So I know you have to run off to teach. Thank you so much for being so generous with your time. We will let you know when this comes out we kinda use their phones instead of cancer, but we'll get it out there. And I would look forward to some additional conversation. I think you have so. We have. I I mean when you talk. Our first Byron, Katie. I mean, I've known a her work forever. I use some of and she clearly has figured out a way to get to the heart of this whole issue more directly than anybody that I had seen, but your discussion of the ego. Let me know that. You know what I'm saying? Like, just we have we share? And I was interested in what you talk about. Because I wasn't there for your you were there. I will connect you into some of my work. I'll send you some of my my box. So that's nerve wracking to give faculty member any writing. I have price them some post traumatic stress to work on. Conversation was forty amazing. Absolutely amazing. It was very helpful. Thank you so much. Have a great day. Oh, go ahead. What I would like I think I would be interested in learning more about what you when you to me of that the ego thing that triggered me like that's cool. So. I like that. I like that. Well, if you're up for them going to be back at Stanford over the next couple of months, and I can just send you a quick. No. If it works me, we can grab a Cup of coffee or something. What are you doing? So there's percent health care. There is I need to look at it here. One of the things I know for sure I'm looking at my calendar quickly. There is a March twenty fourth something for physicians retreat that there have been speak directly to the physicians inside was gonna come in just because it's beautiful area in live in Omaha. Nebraska was gonna come in and spend a few days in beautiful California by no that's one day. I think the others are kind of working through what to do belly. We're a lot with Google in end Anna plan in some of the other high-tech folks out there as well. So. A half hour to the next CoCo weep. And just like to know that I gotta go bye. Thank you. This is the no ego podcasts where we did the drama and entitlement in transform your role place. I'm signed Wakeman.

Byron Katie Stanford University eagles United States Wakeman Fred Silicon Valley Stanford Vantaa Huddah Aram UCLA New York Times director YouTube Omaha Google CNN
SaaStr 435: The Future of Sales Post-Covid with Sam Blond, Chief Revenue Officer @ Brex and Jason Lemkin, CEO and Founder @ SaaStr

The Official SaaStr Podcast

25:40 min | 5 months ago

SaaStr 435: The Future of Sales Post-Covid with Sam Blond, Chief Revenue Officer @ Brex and Jason Lemkin, CEO and Founder @ SaaStr

"This is sastre founders favorite series where you can hear some of the best of the best from sastre speakers. This is where the cloud is getting compliant with a sock to report. On your company's twenty twenty one roadmap vantaa automates the tedious and time consuming process of collecting evidence for an audit. So you can get focused on growing your business. On average vantage customers are sought to compliant in just two four weeks compared to three to five months without fanta learn more and redeem. Ah one thousand dollar off coupon at vantage dot com forward slash sastre today. The future of sales post covid with sam blonde chief revenue officer at brex and jason lumpkin. Ceo and founder. at sastre. everybody at sas sastre. I'm here with one of our good friends. And my good friends for me since almost inception sas and for you guys since the earliest days of sasser sam blonde now chief sales officer at brax one of the great innovators in finance and before that head of revenue stints at flex sport rain forest and others in dating ourselves of going back in time. The rock star pretty much everything that adobe sign echo sign and i really wanted to bring someone back a good friend to talk about what's happening in sales post covid right. I mean we're coming out of this. We're coming out of this. Vaccines are going out. Texas's for better or worse at one hundred percent capacity and we've been selling we've been selling from home for a year. Haven't we sam in crazy to think about it. It was sorta like january february two thousand twenty s over. But it's now been here since all of this started In in crazy thing about that. Thank you for having me. Jason awesome to see you and Excited to be here so so much. I want to learn but let's start with some framing. How much of your sales team today have you hired since cove and how many of them have you met. So we've hired. We're accelerating hiring. We slowed down in a lot of twenty twenty when we are just figuring out especially on the go to market side just figuring out like what what is the impact of covid noticed up and we. We make a lot of money on credit card. Spend and so. It's reasonable to thank credit card. Spend would come down given things that you think about what people spend on credit cards travel in its restaurants. And it's all these things that sorta disappeared that said our revenue did the opposite of what we were a little bit concerned about which was accelerate because the space is that were selling into or tech n e commerce in these companies that spend a lot on things like software and servers and ads in things. That more money is coming into today. Yup hiring so accelerated in twenty twenty one the folks that we have hired since cova began in the silver organization. I don't think i've met a single one of them. Person of course net net over even a manager not even a manager for a walk and talk or anything like that. So we've made a lot of internal manager promotions. We ought you an external manager hired. Actually somebody that. We brought back more former rex employees that we re hire. She's she's greater. Name's matty so. I have met her in person despite the fact that she was sort of a a post covid leadership higher. So you know. Let's say we maybe made twenty hires met all of them Over zoom and none in person and it seems to be going well. But i know we'll go deep into a bunch of these subjects. Got it and so there was a brief slowdown. It seemed crazy but then breakfast on fire because your customers are tacconi. Commerce right the biggest beneficiaries of covid. And i think and rica moved to moved out of san francisco to write the founders of brexit. Goner are you going back to the office are. Are you going to go back to floors of endless as sdr's like in benefits and others days where we go. Are we ever going back to floors of san francisco. Lots done back. I think wreck sort of nick. We made the decision very early on. I think it's it's really paid off for us. We made the decision barry early on that. We are going to go fully remote even after govan's yup so that allowed us very early. Let's say back in this sort of like june or july time last year to begin hiring anywhere at least in the united states is primarily focused in had we Sort of the emden hot about the decision to not really made her mind up it would have. It would have forced us to continue hiring maryelle office locations so we are fully remote. You alluded it badri reggae. They're taking advantage of it so they they they now live in los angeles. Our head of product moved to austin. I have my head of sales development. She moved to dallas in people in the company are moving all around in one of the things that you and i just caught up on. There seems to be one theme in. That is out lots of good weather so sort of like california taxes. Mostly warm weather states. Not seeing a lot of new addresses in In minnesota got it. And do you even care. Where hires live now. Is it relevant at all the hiring process. Interestingly yes we have a. We have a bias towards new hires. That actually aren't in san francisco. New york los angeles will we categorize tier one cities. Because there's cost savings associated with hiring people in a lower cost locations. So of these new hires that we've made lots of them. Do come from non seamers go new york tech places in engine. One thing that i forgot to touch on is this sort of like are the days of is sort of like endless. Rows of sdr's and sales reps within a san francisco. Are those over. I think probably probably years. They never in the reason that i think probably think district accelerated something. That was already starting to happen. Which was oftentimes companies would start in san francisco. Founding team would be there you start growing and then when you really reach a point where you're scaling you have a processing place edens or outsource in open up a second location in lower costs. City does innovates. did it in phoenix. Rexha done it in salt lake city into what you've got zero cisco or like the sales forces of the world may be these these companies that grew to be really big long time ago. But i don't know that there are examples of more recent companies that are hiring that way In san francisco anymore. So let me let me go back to a point you made about tier two cities being more cost effective in. I like to understand what you've learnt on the one hand that makes sense right. You have to pay people more in san francisco both both because of cost of living and competition on the other hand a traditional at least a compliment with an ot tied to a quota. How does this tie into salaries be normalized across the country. Because let's say you have a two hundred fifty k. Ot for a million dollar quota just to keep it simple right. Does it really matter whether in arca or san francisco or pensacola florida. How does how does that make it. More cost effective in traditional e com structure. Well two things that. I may not be answering the question directly so okay did you come to mind one is like how do we do this. Yeah in the second is some things that are locks for us that we didn't necessarily have Previously so the versus. How do we do this. We were with our people team in. They have different cities and they'd pegged them based off of cheer. And it's it's all cost of living related into you mentioned if there is an eighty in san francisco at the two hundred and fifty thousand dollar compound what we do is of we're hiring them in denver. It's a tier two city so we look at the denver cop for two fifty. And sorta like peg that to the san francisco rate may come down to. Let's say two hundred these early injured in that type structure their competence. A fifty fifty split. And so they they have the same target They're just making money based off of where they live and not the exact percentage of what they're contributing to the company. So that's sort of how we we structure the compensation and then in terms of some doors that is opens for the business. We've found that having humans in we can say it's sales or we can say it's some form of support but having humans focused on driving behavior in specifically customer acquisition or product. Adoption did win. We put humans there. It has a huge impact in there becomes a point where the cost doesn't support pudding humans on specific tasks as it's too expensive picking up. The phone is the one that drives me nuts. You got to pick up the phone right you do. If you're picking up the phone and paying somebody ten dollars to pick up that phone they can only do so much to think that boehner certain activities that they can do with that if you make if you make five they actually do a lot of different activities and so what. We're finding as we expand outside of the united states. There's actually more things that we can put people on that. That even becomes more exaggerated in one of the things that we're thinking about doing this year is something like a expansion into brazil where we have a lot of our founders from brazil lots of employees are from brazil so we can get a office in brazil that allows us to pity list of Of cost of living there the activities that those people can do to drive additional business. It just opens up a lot more to to us. I love that i love. I want to just pick on. Follow up on one thing and then push on one other. But i love that. You're using the cost savings to invest more in support and customers right because that's the biggest tragedy to tech companies. They pay so well. They make so much revenue but they can't afford to pick up the phone. They can't afford to have humans. I think we've all learned we want more. Cs don't we want on boarding to be better and easier and humans. Make it better. Software alone can't do it and the fact that you're doing which i implore anyone listening to this to do which is invest those savings and more people to make your customers happy right more people that do not make six figure incomes prima donnas that can actually make the out the best investment. You can make even if your products easiest using in the world. I'm brex customer. I rarely need any help. But i want help and five seconds like if i have a problem and i don't wanna have to always figure out the website right. Maybe it's too specific example but this is magic for nps. Isn't it in customer. Happiness is magic for retention right. You nailed it. Everything you just said totally nailed it. We're doing right now on exercise of a bunch of people on our executive team building. What's called a flywheel. Yes and a big part of it. I'm sure everybody's li- we haven't gone over. The net is sort of like inspiring customer love and rather than maybe taking the savings that you get by hiring in a a lower cost location in putting those you know towards the bottom line in business instead of we can reinvest that in things that benefit customers. That's a big part of what we're thinking year with with. What going remote opens up for us funny story. We're at sam. And i are both investors in a company called gorgeous sort of like as free. Commerce got a huge boost after covenant at the last board meeting. I love the whole team. But one of the sater's khanna complaint never complaints. I mean he's great right but he said how come now. We have three times as many people in sales. I said well look what happened your time to deployment went down from thirty days to one day. And all these folks. They're not in the bay area. Right there in europe there in low cost centers of europe and the rest of the us. I'm saying that's that's where you invest the money. That's magic the fact that you have three times as much as sales should warm your heart as a sales later right. Because that's going to be your magic to get in your nra up isn't it. You nailed it as you're sitting sitting you're thinking about this flywheel the investment in the. You just talked about two gorgeous. It's gonna make the customer experience so much better. That's helpful to the brand. And that's helped the reputation that makes selling easier so the fact that they are investing so much in and making the product the customer experience better actually benefiting the sales team. Yeah let's just finish that point. We could talk about forever but people get this wrong if you if you have cost effective high quality humans. That is the single best investment. You can make software. It's totally non obvious right. But if you have folks that are cost. Effective that can improve your. There's always gaps there's always gaps from trial to deployment to on boarding to renewal questions and humans can fill those. You'll never solve all those gaps with software. Right zoom doesn't do it. You'll never solve all of them with software and you will have happier customers if you put people right at prop put people on problems right. It always works. Doesn't it the right people. The right asked me the right people. Nothing worse there's nothing worse right but Almost never have a worse outcome. You put somebody on a problem. Say improve improve. The numbers here very seldom did they come back and it actually got worse you put me on this and i made it worse. You have all right. Let's go back to one last thing and then that's before but because so many so many founders in particular really try to work on their sales complex so let's talk about this denver versus sf sf almost doesn't even exist for brexit anymore. Okay but we've had we've had salary differential since the dawn of time right. It's the federal government pays different salaries no matter what anybody says. Big companies are never going to pay everybody the same everywhere on the globe. At least the majority are somewhere and more power to them. But most most of that's gonna go away by fifty one hundred employees right so it's nothing new but we're i get a little confused is around accelerator as an incentives okay. So let's imagine you have a rep in denver versus sf the two hundred versus fifty ot theory. Make sense right in theory make sense because normalized. They're the same right and let's say let's be simple. Let's say the quotas for axa. Let's say it's eight hundred k. Right but if you got into the bonus if you get from instead of doing eight hundred you do a million. That's so valuable to the company. Does the denver person not keep as much of the extra two hundred or did the accelerators have to normalize even if the bases are lower. So tell you do it. Yeah it doesn't mean that that's the right way of doing it it. Maybe we could drive different behavior by doing it differently or says so certainly can be debated the way to do it though. Is we believe that two hundred thousand dollars in denver feels like two hundred fifty thousand dollars. These illustrative editor that. These are the exact numbers but two thousand dollars in san francisco feels like two hundred thousand dollars in denver in terms of cost of living in in the where the home that you're able to rent with ad in in prison whenever enzo win. People over perform in extra ten percent is ten percent on each of those so if somebody gets an accelerator in the two hundred fifty thousand they make two seventy five in in denver they make To to twenty jin percent of what your your salary is not necessarily hard dollar value. So the person in san francisco. That's over performing. They do receive more hard dollars but they leave the same percentage increase. That makes it after you know after costs and taxes. It's the same right or sort of right. It makes sense. I have to noodle on it. Because i like things simple. I don't like to folks making different amounts for the same active about logically consistent. Right you're that way is a simpler way to do it. Isn't it the same whether you're right like people in it. They're they're like we measured on You know how many many tasks they can complete or whatever the metric is and we should expect to the person in denver to complete sam number of cast as the person in san francisco and going to be different sale. It's universally applicable that you're getting paid less for producing the same depending on where you're located. Shed a little bit about training and on boarding in. I'll tell you get. I want to hear what you've learned to improve training and on boarding general like with the distributor team but first let's talk about sdr's. I find that entry level. Str's straight out of a two year program or whatever i mean we have trained them since eighteenth century by osmosis right by folks. Ask seven thousand questions. A day turnaround rapid-fire asking questions making the stakes. How do you train these folks over over zoom in slack. How do you make that work. It's so different than the past isn't it. This is when you and i emailed the ballot chatting on this topic. This is the group of customers that came to mind or this is the group of employees. I'm sorry became nine for sales. It's going to be dr druther departments. Most junior employees entry level stuff right mark zuckerberg said those are the ones that have to go back to the office. He said everyone else can work from home. But at facebook the newbies half to come in right totally an win so cove it for started in then when we made the decision to go remote. This was what was on my mind. Mind because i remember. I joined a eco-design in two thousand eight in. I was shortly out of college. Twenty two years old in just thinking back. if. I didn't have the forcing function of needing to be in an office in sort of like appearing there and i had a manager that was sitting next to me. What would i have done with my days if i if i woke up in the marina. Go in you know. Maybe i'd gone out thursday night before. What would friday look like for me. I so that was my big concern. I think my thinking has evolved a little bit and then we can get more tactical in terms of what we should actually do. But they use evolved a little bit in an accountability is less about sort of showing up and it. It's it's more about performance in so that line of thinking is incorrect. Now d- i've come to the conclusion that that line of thinking that these people they're not gonna work is not correct because i think what's going to be motivating in they'll be accountable to is hitting certain numbers and not necessarily being in office for a certain period of time. We've actually found that to be true. lost productivity with this group of employees. The question would be best answered. By ashley kelly who are director. Sdr natty who. Who's one of our managers in terms of like tactically. What they're doing but icy a lot of a lot of times on calendars where people are doing the same activity. And if everybody's on the same page let's say there's a prospecting block for two hours in the morning you get everybody in navy or even on zoom call in the background where people can sort of like unmuted jinan. Hey as ever seen this before. Do you know this product like this system. Works or anything like that but doing the exact same activity. You've got a slack. Channel that people can type in successes. Celebrate those things if you keep everybody doing the same sort of thing. I pacific time blocks. That seems to be something that's really valuable. That is a big change from the classic. Throw a bunch of str's atta at a random list. Right have structured blocks where everyone's doing essentially the same thing at those times yorkshire days the structure days. Yeah ideally there should be a period of time and this may differ by time zone but there should be a period of time. That cold calling is the most effective. All right let's have our cold calling walk from you know nine to eleven. I get the whole team together. That's where it went from nine eleven. We're doing our cold calling. Fb right every ronin same direction doing the same activities and then a lot of what to be that. The sort of like tap your neighbor on shoulder ridge just a ton of communication whether it's over zoom over slack whatever the sort of medium is it's just in reinforced that at the leadership level. So lots of things like. How's your day going anything. I can help with a constant communication zero. You have to take place in your in office and if you found. I've only seen this anecdotally. I don't have the data. But i've found that for sales folks in particular true anybody but especially sales and some extent marketing folks. It's much harder for the mediocre to hide now right in the old days. We're just driving from the marina and hanging out in the office. Got you twenty percent of your brownie points. No one cares anymore for someone that shows up to the zoom woman. smiles do they. Have you seen that impact. Sort of like maybe digest below mid pack group. Have you seen them stress out on the situation. Have you seen better performance from folks like that or is this not seeing this behavior. I think what i'm seeing. Which is maybe related is in the office. There are a lot of personal relationships that existed. And i think also a lot of the shift to remote has i think more ever made the sort of perception of performance Very data driven. It's less exactly right. Yeah the. I'm in data so much more and so much less going to lunch with people in developing these sort of personal relationships that can make her performance evaluation. Subjective win you know somebody. They're great person in like you really like them and all of these instead. It's much more seeing how people are stack ranking in. You don't get as much of that sort of like one on one going to lunch now. There are bandages and disadvantages of that. But i think it does shine a much brighter light on this sort of like performance of people. Because that's that's all you're seen in less sort of personal relationships that often exist in the office so even your level at the top you are. You're finding that you're judging folks even more quantitatively than you did before. And i think that's the thing there's always this persona of bob. Whoever unlikes likes in the office. That's not that great but he skates by because of his persona. I find bob's are not only not skating by. I'm i'm finding their deeply struggling. Now they're because they're toolkit doesn't work anymore right. That's true. And i think or oftentimes we would make in excuses for bob. Bob is goosing survive. Endless everyone has an excuse for bob right. He always makes it two more quarters than he should. Have you always last two more quarters in asia. Trying so hard. He's such high so hard. Yeah he's in the office. Am every day you see that. He's sitting in so every day that a lot more time that goes away and so the other thing. It's it's sort of related is there are people who in this is maybe less true in sales the exist Less comfortable like asking for help in did they're just not they feel like they're intruding or they're taking somebody's on those types of people will struggle more and what but we all have. Even i have some of that right on top learning. How do you encourage people to ask for more help than there. Used to before distributed days. Well i think it's a two way street. I mean by that is we have to encourage people to ask in zale lake. You're you're you're not going to be successful if you don't and if you put it in terms of success vali-e-asre there aren't asterisk talk about this data that we're looking at its people's performance. There's not an asterisk next to bob's name. The said bob reached out to his manager. A bunch this month to get help to get to his number of it. The numbers are the numbers. And you put yourself in a better in a better position to be successful if you do seek help so like we encourage that that said it. It's a two way street where we need to tell bob to seek help but we also have to to set bob up for success in created an environment where help finds its way to bob It's more constant communication. It is more of the proactive. What can i help with anything that you need. Let's go to quick even if it's just like a five minute call. I want to check it and see how your day's going sorts of things really make a difference. Vantaa makes it easy to achieve and maintain sock to compliance automate your security monitoring with banta and get ready for a sock to audit in weeks instead of months learn more and redeem a one thousand dollar off coupon advantage dot com forward slash sastre again. That's advantage dot com forward slash sastre.

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Alyssa Ravasio - Supply, Demand, and the Outdoors - [Founders Field Guide, EP. 31]

Invest Like the Best

1:02:54 hr | 3 months ago

Alyssa Ravasio - Supply, Demand, and the Outdoors - [Founders Field Guide, EP. 31]

"This episode is brought to you by vanda. Does your start me to sock to report to close big deals or do you already have a sock to report and wanna make it. Easier to maintain vantaa has built software. That makes it easier to both. Get and renew your sock to with antics. Continuous monitoring solution you avoid hosting auditors on site and taking screen shots to prove that you're compliant so you can focus on building your business fanta parts audit firms. Who file your sock to report directly inside advantage at a fraction of the normal cost. Hundreds of companies including more than one hundred y combinator businesses are leveraging today to streamline compliance and focus on building their businesses founders field guide lizards can redeem a one thousand dollar off coupon advanta dot com forward slash patrick. That's advanta dot com slash. Patrick this episode is brought you digital ocean digital ocean provides founders and creators with the platform. They need to get their website and apps off the ground all with low bandwith pricing to save them. Money over other cloud providers. If you're looking for the best place to build web apps or api back ends on robust infrastructure digital ocean is the place for you. They provide a fully managed solution. That handles your infrastructure operating systems databases and other dependencies on their new app platform. Product at platform makes it easy to build deploy and scale apps. Or if you prefer to manage your own infrastructure digital ocean provides a suite of products that gives you full control to learn more about digital ocean get started for free at do dot co slash founders. That's do dot co founders alone. Welcome everyone i'm patrick or shaughnessy. And this founders. field guide. founders field guide is a series of conversations with founders and operators building great businesses. I believe we are all builders in our own way in. This series is dedicated to stories and lessons. From builders of all types founders. Field guide is part of the colossus family. Podcasts and you can access all of our podcasts including edited transcripts shouts and resources to keep learning at join colossus dot com patrick o'shaughnessy if the ceo of a shaughnessy asset management all opinions expressed by patrick and podcast. Guests are solely their own opinions and do not reflect the opinion of o'shaughnessy asset management this podcast for informational purposes only and should not be relied upon as a basis for investment decisions clients of a shaughnessy asset management may maintain positions and the securities discussed in this. Podcast i guess today is elissa. Rivas co founder and ceo of hip camp a platform to discover and book your next camping trip. I was excited for this conversation. As it combines. Two of my favorite passions the outdoors and entrepreneurship in our discussion. We cover how alissa bootstraps demand in the early days of hip camp the importance of creating not just great experiences but magical ones an evolution of hip camps business model after listening to this episode. I'm sure the first thing you wanna do is get outside in nature. Please enjoy conversation. With eliza revise lia. Solis i think we need to start at the beginning. This is one. I've been looking forward to because it unites. Probably my two top passions the technology software marketplace world and the outdoors. So green dying to talk to you about what you're building hip camp. I'd love to hear the kernel of original insight that led you to start this business as a place to jump off short and they should have any patrick. There were a couple important colonels. It's ten of a company that evolved prettier ganic over the years. So the original colonel for him cam really came as the result of unsurprisingly camping trip. Gone slightly awry. I was very fortunate. I got to gross than loss of time camping with my little sisters and my parents and my friends and it was always just huge part of my life and really a lot of what i look forward to and loved most about growing up but catalyze chip camp was for my then boyfriend now husband from australia and i wanted to show him the beauty of california's coast until i was like you know what i'm gonna figure this thing out. I normally just go with my friends. Who do the hard work. But i'm going to do the hardware. I'm gonna find the campsite. Then take him on this trip. And i just could not believe how broken in the process was. I almost gave up five different times in the process. It crashed by chrome browser zero to many different cavs received parks counterparts a private parts in federal. Parsons total mess. But i persevered when finally found a campsite at a state park called andrea. I didn't take reservations which was good news. His age took one look at the reservation website in not willing to go. There landed up dragging down on new year's eve for twenty thirteen got to the campground. It was a beautiful spot. We got last night actually at the camp pre lucky but when i walked up to the campground everybody else in the campgrounds here. Every single other campsite had surfboards wetsuits. All this surfing gear and we walked out to the beach. It turned out there was an incredibly beautiful point brakes really well formed fairly right in front of the campground and i had read hours about this camera. I had researched everything. I could find online and no one had mentioned to surf break in so as a huge surfer at the time. Especially keeping my surfboard in my car and for this camping trip because there been no mention of surfing i took it out of my car and so it actually driven doubted campground without a surfboard. Only to show up and find that despite all my hard work in research it really missed for me would have been the most important piece of information about the specific campground. So you know it's still good trip that it really highlighted for me. one broken. The process was to how much socks even when he tried. Really hard to kind of end up left out and not knowing the best beta about the outdoor spy so driving back into san francisco just the next day. It was new year's day. They just kinda hit me. It hit me all at once. Actually where i was like. Wow hold on. Going outside of newseum inmates me happier and healthier and just a better human and convinced. And it's really part. It's way too hard to do so the experience broken and there's just no good technology that really makes accessible and easy to us so kind of had this idea to solve getting outside with the internet. I love the internet. I created a major about it in college in a big leverage power to transform our culture. That was the original colonel. Its use the internet to make getting outside easier for people with the belief that if it's easier more people will go. Can you say more about what you did in college. What sparked that interest did you create. What's the primary lesson that you came away with. I went to ucla to study. Fill that had been my dream since i was nine years old. My very first company was a film production company where employed my two little sisters and we made music videos going to ucla and being the director like francis. Ford coppola like that was the plan. That was the dream i got in. It was incredible in something. Very unexpected happened. Which was they became obsessed with the internet. There is in particular one moment. Where brand farren. Who has a believe at the time. The head of disney magin. Airing said that the internet is the greatest sleep in technology since language itself. And just in. That moment i was like oh my gosh i believe that i think that's true and if that is true that's even close to true. The next hundred years are going to be among most transformative of many millennia preceding this moment in time. And how could. I possibly spend my life doing anything but learning about internet. How to harness its power and how to really shape the impacted senate have on our culture it on our planet and so that link was a hard return for money to make movies and so i actually tried to pitch the film school on. Hey let me create a special major in film program where you don't learn Directing but instead i learned about how the internet's going to impact distribution of business models. And they were like that's what we do here. The program fair enough right. They had a whole program credible program village out to really focus on storytelling the creation of film and so it just wasn't a good fit so i ended up in order to get my degree which i'm pretty sure that i ended up getting actually creating a major about the internet. There's a special individual studies program prior able to spend the last couple of years at ucla really hand-picking classes that by my mind with my professor advisors sign off constituted. a major with the focus on the internet's impact on our society. So anyone out there ever has a chance to create a major or your kids. I think it's one of the best ways to get the most educational institution because you get to about what you love. And what grabs your chest. Was there any subsequent lightning bolt type moment in your learning in that self directed major. That got you most excited about the internet. Generally speaking so obviously. I think we all would agree with you now like it is probably the most important invention any specific feature of it. That got your attention. Most actually big change. The name of the major was democratization. So the major actually ended up being called digital democracy with that meant to me. And what i think is so powerful about the internet takes opportunity and information and access it traditionally has been super limited to a few and in many cases has been consolidating to a few and blows that bottle wide open so good examples like television like before the internet there was like a set number of stations obviously cable. Tv kinda helped expanded from very limited number of network stations and the internet comes along like youtube tiktok. Everybody can have a tv channel now. That dynamic in particular. Jimmy has persisted across so many of the biggest trends that the internet's helped catalyze. I think really are genuinely reshaping whether that's couldn't bat one of my other big leases. That technology is actually neutral. Don't think internet here to save us. Don't think that it's an incredibly positive thing. That's got everything i believe. It's a neutral technology if impact will depend on who learns to use it. They use it for that. Could look like tons of fake news completely degrading the integrity of our political system because no one has a solid set of facts. Operate from anymore or it could lift lake the greatest revolution we've seen in creativity with creators now everywhere telling their story and really creating a culture that has much diversity in how we represent our lived in trade experience can really go either way and that police i think also really at the core of why i decided. I had to make my life about this technology. I don't believe that it's inherently good or by one of my favorite things about the early internet especially some of the companies that dominated it was this marketplace concept think about ebay craigslist has directory. These were incredibly powerful. Things enabled by the internet in a really unique way and they sort of also enabled this long. Tail of supply-demand matching hip. Camp obviously is the marketplace. I'd love you to begin by describing what you decided to do. I maybe described the marketplace even as exists today or as it did on the first day and how it's evolved. How did you attack what to start. I it's evolved quite a bit of resume back to that first moment of gosh getting outside. It's hard in this. It was easier where people do it in the internet could solve the original. Even know if i'd call it a marketplace back then it was really more of a discovery tool our goal was at that point to aggregate the existing places. One might go camping so we put the state parts of the national parks county parks all on one hour one easy unified interface reviews voters etcetera news. Great products people really loved it solved. Where a real need for community but over the first few years we kept hearing this be back again and again it was pretty scary from like an existential standpoint as accompaniment was he your products. Cool that everything's booked up all the time. So i can actually get outside or when we finally would find a campground that was a totally at capacity and we put it on the homepage. We could hate mail a. That's my spot you blowing up my secret spot. Why are you doing that. I hate you can't just like. Oh my gosh hardly ever gonna sell our mission to get more people outside when our existing outer intrastructure is already chronically underfunded which we should fix and overcapacity. How are we going to solve this problem. My first attempt was to try to convince the government to build a lot more campgrounds they worked on earnestly for years finally do to really financial necessity in need to find a business model to keep this company in. This team is dream going we said. Hey let's work with private landowners. Some of them had emailed us. They actually reached out. And said hey. I've got land expensive to maintain navy people would want to camp here. Video was not intuitive to me. At first i'm not ashamed to admit i had no experience getting outside on private land so it just wasn't obvious to me that that was something that might be fun or enjoyable. But we decided to give it a try and so that was sixteen. Or so. And i would say that was really when we became a marketplace and in that moment much like the democratization trend of the internet that we've been talking about. I realized that the existing traditional outdoor infrastructure while amazing one is is really limited and two is actually quite narrow who it serves. You don't wanna tent camp and sleep on the ground and a campground was a bunch of other people. Or if you don't wanna backpack many miles into the wilderness and bring absolutely everything you need to support yourself for a few days. Maybe getting outside is and what happened with hip camp as we opened up spot from that supported now tens of thousands of entrepreneurs in creating these new outdoor experiences. We that there is a huge amount of demand at a huge amount of supply so much more diverse and so much more relevant than a traditional campground infrastructure. And so now on camp you can find your with an oceanfront view and you lobster the host catches for you brought to your door. You can stay in glamping tent and go on a trail ride to learn all about rodeo culture from the father of the west most winning rodeo family you can stay on a farm learn about organic farming and have a farm to table meal and understand you know what a big role. Agriculture plan fighting climate change like that is a much broader and more think relevant said of outdoor experiences than traditional campgrounds and again. That's really what the internet makes possible. It's the democratization of that experience before we go a bit deeper into the businesses progression itself. I'd love to ask a big question about recreation and also hear a bit more about actually the experience of surfacing the information making legible the v. one of literally just here are the campgrounds so it started that to recreation so one of the things you said to me at the time was this is a shockingly big industry so it'd be interesting before you give the answer for those listening to guess what the size of the outdoor recreation industry is. But i'd love for you to walk us through that. Like what are its components. Its dimensions and the size of the market when you export. It tells me everyone's got guest ready. You'll never guess handed. So i've actually had the good fortune of working with the outdoor industry association quite a bit on this end turns out the outer industry while a new industry right. It's really an industry that's been around for a few decades as like a proper industry actually a hundred eighty seven billion dollar industry domestically that employs over seven million americans in creates tens of billions of dollars in both federal and state taxes every year. And so it's actually the secretly just giant city there. I think part of why it's not so well recognized as an industry that is just so. Many of the leaders are getting outside on their free time timeless and aren't focusing on lobbying the government for subsidies or recognition or so much of what else you dries recognition of other industry. Starting to happen if we zoom out ten twenty fifty years into the future i think the growth of industries could it be tremendous to see you came to this admittedly massive sort of hidden industry that you said if you think about pre cova terms it was bigger than like the pharmaceutical industry. Like something everyone would recognize as a huge thing and there was no proper discovery mechanism. So again back to the internet being democratizing the other thing it does make legible in unique ways. How much of a bear was that to make happen. What was literally the process of if someone else wanted to start something where they're taking like fragmented non digital information and centralizing digitally like. What is that process like super fun. If you're a data lake me so the first thing was to create a data schema how are we going to organize. A state of what is a proper scheme. Look like what's really the infrastructure in which we want organized status so we were mostly focused on parks and campgrounds so really establishing of all that hierarchy that has won. Many campground to campground has many candidates. What are the amenities at a campground might have hot showers or running water like really establishing just fat meditate of structure that we're going to fill in and then part of why the original hip camp product despite not being a great business was a great product was because that data had not been structured in organizing at unified way across different agencies. So the reality is most people. Don't have a strong preference county camp. Browns day campground federal campground. Like i want trees and riverine oceans alike. Who happens to manage. The land is not always my first decision. Making criteria into unifying that data set across different previously separated in isolated silos move. Data was really helpful for people so our process to build that data set. 'cause we did build it from scratch. There wasn't like a easy. Api that i just got to pull down may two little sisters. My original film production company employee and my best friend. Natalie and i spent probably a couple of months just literally going funny. We would literally go like the state park website. The county program. We'd often find sometimes data on the website but often it would be in the form of a pd s maps. And we'd be like. Is there a shower. I caught on the map. His okay put yes in that. Google excel call. And then i would write a script that would pull the google sheet into the database that recently learned how to code partially out of wanting to create this website and i was good enough to use of data import so that was literally how we built the data that originally it was just great. I'm organizer i love when things are color. Coded and organized in their categories. So i got an incredible amount of pleasure from organizing the data around parks. I love that. And i hope people listening like think about. I've always fascinated by these early. Like manual efforts in these businesses that lay the groundwork or the foundation for what comes next when the product was built on top of that new data schema data set. What was most surprising to you. In terms of like what people used the most or cared the most about when using the original product. It was actually showers. Shocked me and we also back. This is another fund early great story. I somehow talks brandon street and san francisco into letting me just put like a table in front of their store so it was just like sit there for days and and talk to people coming in and give him stickers or a do you like to camp is so because you look at this wednesday quickly. Could you give me some feedback. I was shocked at how often especially men would tell me. They've been trying to get their girlfriend or wife to go camping with them. It's been a huge push. But she's only going to go if there's hot showers. It is like a deal breaker which was surprising to me because data. Certainly not a deal breaker for me. So i was like. What's there are people there who will only camp if there's showers and then it was cool because the data we have some data tracking some analytics than men. Showers became an remains one of most widely filters because people before him did not have a unified way to say. I only want to see my options with showers. Thank you very much. But that became think again away that in a little way back then we just outdoors a lot more accessible to people. I've learned some large percentage. Of what i know about marketplace's from sarajevo one of your investors and board member and one of the things that always stands out is the importance of focus and liquidity of the marketplace in the early days. How did you manage that problem to make sure that one. You're surfacing supply but also that there was demand that would care that would start to precipitate a classic marketplace dynamic and flywheel chicken and egg. Yes the proverbial. I wish i could tell you. My like brilliant master plan works so well but this was a beautiful accident. I'd say because we started by aggregating Dean public campgrounds. We bootstrap demands. We had demand people liked the product. They understood how valuable it was to have. That unified data said an infrastructure interface to look at all their camping options across different government agencies. When we began working with land it was as simple as just slot him in there and may give them visible to our community so because we already had the demand community are very first. Host is another great story a beautiful ranch in northern california. They have hands about three hundred acres and a beautiful world class fishing river running right down the middle of it. We got them to join by convincing mountain hardware to purchase fifteen thousand dollars worth of camping from basically pre booking for a lot of the dates of their summer. It was amazing because down hardware really was helpful in launching the concept introducing the category getting to the initial awareness. But we were also able to put a ranch on our search results and people started looking at right away. So i think getting that demand going put us in a position to create a lot of value for our landowners for our host for partners there right away and that was really important because then that host was like completely blown away at how much money they made that first summer. They actually told me again to this. Summer is a father of a few children. He said this property fun fact one in dais game during the gold rush era by his great great grandfather men in the family for a hundred years. No real lake clear intention or purpose for bits. Don't west solid love it. And he said up until finding champ. This property is always a bit of liability. I've been worried to pass on to my children. Because the cost of land management especially in the west with all the fire danger that we have because most landowners are completely financially responsible for dealing with any fire management prevention fire. It's really scary. I don't know if my kids are going to be able to keep this land in their family. I don't want to put the pressure on them. I don't want to create this hard situation for them or they have to sell or not. So hip camp has flipped this property from liability to an asset. That i'm gonna be proud to hand down to my children. And that was our first customer for months in it. So i think being able to create value in unlock that much value on what was previously a fairly underutilized assets. Certainly the most valuable asset that they owned as a family that was possible because we strapped demands effectively leading up to that moment. I love the idea of come for the tool stay for the marketplace or stay for the network and a unique way of aggregating the demand early on. Walk us through the. Maybe we could use like that ever gets like airbnb. Go stay somewhere you pay of nightly rate ranges or the average. There's maybe a locked box or something. There's momentum these land or camping sites very different like there's no key to get in what are like the logistics that you had to build out to help landowners manage access to their property and like what were they. Just the unique aspects. Where you're being be would start to fail as an analogy. The biggest one is that a lot of camps exist in places where cellphone service doesn't work early on we didn't have a mo- black. We actually only daughter mobile app assi a year and a half ago and part of why we waited too long to build a mobile app as we created this very funny solution of just relying heavily on sms. So if we knew you were going camping. Let's say tomorrow. We would text you all directions all the access instructions. Screenshot this or luckily you know people can access their texas dream without cell service so he knew they could get to it whereas if we just email that to people depending on your email client you might not be able to load your email out the wilderness. So i pretty quickly move jassim. Massive close to one of the primary ways are hosted interoperative camp even that we have in out now for a lot of them. The estimate is still actually the primary interface. I think just really paying attention to the reality on the ground with any market has offline component mice strong perspective. Is that your product. Is that fine experience. Your website on all the apps are important products that they really served as ways for people to access the real product. Which is this outdoor. Experience in so sms was a huge part of the solution there and then we have a lot of gate code access instructions. And so you can imagine if you don't have the gate code. You drive up to a gate nine pm on a friday. That's a big problem without cell phone service so we just invested a lot in building again really structured data that are host really fill in. Do you have a gate code. What is it okay here. You go making sure that campers don't get that until it's time for them to arrive but making sure they get it so that they can actually access the property even without service so it continues to be bidding process. That was a huge part of the original. Earning it also seems like other unforeseen problems that arise given the nature of what they're doing outdoors like things like injuries or safety. Or what have you learned about other unique aspects of being outdoors versus indoors and things that might map back onto the hip camp experience or even like things like liability getting our insurance policy which covers our host for any liability incident was just a huge milestone for the company and it was pretty hard at first. We finally with an amazing advisors. Sarah slanted helps so the marketplace for boat rentals appear to peer marketplace for boat rentals. She was able to connect us to an insurance broker. Who's fantastic and they were like. We got you don't worry. Previously we were leading random people at other end of people's watercraft so a busy remember the day we got insurance because we will call up all these landowners who we talked you were like. I can't do this until you guys can protect me. Man get them all signed up right away. I think actually law school. There's like some case studies. They go through where it's like someone trust passed onto someone's land and broke their leg and still sued the landowner. Somehow it's just crazy. How a lot of legal structures built around my ability on land and so having. That policy has been critical. They're mostly another big interesting. Learning presses accompanied as a community has been our mission which get more people outside. Intrinsically involves making the outdoors accessible that people who aren't already experienced in educated outbursts people so that leads all sorts of interesting moments of people. Who are maybe. They don't actually know how to pitch a tent. Maybe they don't actually know how to light a campfire or manage it safely. And so we've just invested a lot. In education were proud members of the record responsibly. coalition. We've got all sorts of educational touch points. Both in our checkout. Slow in after you make a booking where we're really bringing people along on his journey in trying the best we can be Standard for having that parent for that friend. Who taught you all those things at some point in your life and often are ho step in as well a shock to host all the time we'll see a hip camper group that can't get their tent up or can't get their fire Like hey into intrude but if you need some help i'd love to help for some of our hosts that's like their favorite parts. Hosted is really being part of the movement to get people outside and introducing where people that how to do so safely and responsibly. I love that an again. you said. Luckily because of the tool you had solved often the most challenging part of marketplace which is aggregating the demand. You could get the thing going so if you think about that. First client and then project for eighteen or twenty four months in that initial period of building the proper marketplace. What was the hardest. Challenge that you face that you had to overcome. We've overcome it. I think it continues to be our hearts challenge which is just reaching landowners. In general we continues to have far more demand than supply their way where people who want to get outside on a beautiful piece of land. They have space to themselves often have really unique experience at glamping. Ten or access to a firm stand with fresh meat and produce from the land on which. They're same people. Want that kind of an easy sell. What's been more challenging as the company is. How do we reach these landowners in a way. That's scalable make sense financially and also kind of set people up in the right mindset to be good members of the community and kind of show up in the right way because landowners in general are just the hard to reach. They're not spending lots of time on their computer or watching. Tv or radio magazines like they have leeann to manage their out on the land. Doing lots of work in so just figuring out how to reach these people that has been our biggest challenge continues to be. Our biggest challenge. Have a hard time imagining. It won't always be our biggest challenge. Just think it's structurally. What's so challenging about the company. We've made a ton of great progress on it. The primary way we reach landowners today this has been consistent for a long time mistress through abouts and surprisingly of course sometimes landowners joining they make lots of money in their really excited and they start talking about it especially if we have density in the local area where it gets out we really can see a market. Try to take off that way but more often than not. It's actually somebody goes hip camping. Their eyes are open to this new type of outdoor experience and then on the drive home. They call their dad. It called her aunt. They call their older brother. And they're like. Hey this is perfect for you. This solves that problem. We've been talking about for years about you. Don't know how you're gonna make the blueberry farm where you don't want to sell. It could work. This could be the answer so demand. Creating supply was intently. We kinda originally anticipated but has ended up being really important part of west keeping the firewheel accelerating. How would you suggest other entrepreneurs facing something similar so trying to figure out how to solve a distribution problem. Recognize that. it's the nephew calling the aunt and then pouring fuel on that fire like what is that. look like. how have you tried to amplifier. Magnify the naturally grooved pattern of distribution to make faster. And maybe even strategically how do you think about it. As a leader. I like that. Framing of natural groove. I'm a big believer that as entrepreneurs for not you hear the term builder a lot. And i think that's true. I often viewed as more of a sculptor. Chipping away blocked to see what might be possible to exist underneath. And there's just as intrinsic shape of the market that. I'm not always going to be able to impact and certainly not create from scratch landowners. Just being kind of hard to reach is one of those things. It's just it is what it is. I can't just spend ten million dollars on ads next year and expect that completely transformed so for us. It's manifested in a couple of ways. Simple things like and adding calls to action to do referrals in the right place in the life cycle offense august. It's also lead to something. We always have cared about a lot. But now see-through late which is just recognizing the difference between a good experience and like a magical experiences everything so when people have a truly magical experience as a hip camper someone's getting outside on the platform. Those are the people who call their family members and their friends in the really kind of just being maniacally obsessed about. What makes that experience magical. How can we make that happen as often as possible. That has become more center. And then of course you know at least thinking of ways lake for lack of a better word to hack. The system is really good jew. So when example of that is local press for serrated takes time for people to actually go hip campinas. Bring their friends etcetera. How do we reach those people faster. Getting an incredible article that really explains company and what we do in the mission that also can lead people to go call their family member other friend so often when i hear somebody say my family member. My friend called me. That's why i decided to sign up as a host on him and i asked him. Where did they hear about us often. It's because they want hip camping but increasingly because we're investing more impressive. Like oh i think. They saw an article in self magazine. Not many landowners are gonna read self magazine but their nieces nephews daughters sons. They might so figuring out how to hack in kind of find more ways to kick off the flywheel that you know is working bickford. How do you know when magic has happened. And what have been the top correlates to magic. Actually a big data science question for us right now. Will we see habit. Is someone will make another booking right away like in the first couple of days they get back. That's pretty obvious. But i would say so much of it comes down to the host or they someone who's really being thoughtful about creating an experience in a way that's going to become magical or has potential to and then of course the liens like two hundred acres to yourself with a private waterfall in the swimming hole. Even if the gate was wrong you had to wait an hour. You probably show up and you're like this is the thing ever is a really good question. Because i can tell you like i go to. Hippocampal was hiring Hostal time i feel like you just feel it. There's no but we do need to the data science model to not only be able to better predict which hosts going to be able to facilitate that experience but also help the whole community get closer to men really helped them understand. It's not like always you have showers. That's the thing that's going to create the magical experience. It's more of this. Aggregate emergent result of expectation. Set in a way that they were exceeded today one way shape or form or another. That's a big one. I would also save them. More thought in uniqueness to host really instills into the experience. I think the higher likelihood of really creating that extreme server example. I was recently at a hip camp. Of an oregon. This host has probably a hundred two hundred acres along a river but they built out this incredible. It's wellness themed hip camp. There's outdoor saunas. There's outdoor bathtubs right on the river. There is a tea house so when you stay there you're just kind of walking into this beautiful woman. Her name's mayor. She actually has a festival called spirit. We various with thousands of women every year. And you're really getting walk into kerr. Worldview ev how people made enjoy the land. And it's just so radically different from traditional campground or like something else. You've probably seen the outdoors. That's those experiences. You can be quite transcendant in your life like this is also. I can be sitting outside in a vast rose petals and then steph inside. Have a camomile tea that was growing on the herb garden along the river. And like that's getting outside to like interesting that's magical. It's so interesting. Your is just getting to them in the first place is the challenge but then also sort of i guess nudging them in the right direction to create these magical experiences. What does that mean for if you think about like the next five years if you squint and think of the absolute coolest version of what this has become in. What ways do you think that is most different than one of these. Today has a couple. That one i would love for hip camp to truly fulfil the potential of making the address feel accessible even popular times of year. Because right now the reality is fortunately we sell out early for a lot of our best spots for a lot of the year. As conference than recent horowitz hosted and it was really cool for me because obviously specific demographic but so many people knew about hip cam newton cam pm scrape by the way you know that all your stuff gets sold out around the barrier. I know we're working on his next time defeats the purpose of what we wanna do is just yet another sold out. Hard to get into outdoor experienced. haven't really filled. What's possible here about making the outdoors. Feel really easy for you to get access to on a regular basis. So that's one big one another one. That's really really coming into focus. Just in the last six months or so is building a community that is truly global. I i really really don't want to happen. American company that happens to be another countries to me the opportunity here to build a community that's global nature. The cares about the land is protective of the outdoors. A such a big opportunity. That i just don't want to miss it. And so over the next five years expanding into lots of different countries in a way. That's truly respectful of those countries. Different lands and cultures thought to me is one of the coolest versions that this can become imagine going to japan and getting to stay on t. Fireman going to. Costa rica stayed in the jungle in a tree house like having those truly authentic experiences. Where much like the wellness. Themed hip. Campaign oregon. You can tap into someone's worldview and really experienced what they think is possible for how people in the land co exist and see that across the world. I'm personally very excited about that. Obviously i think is our business has shown from financial in from just a growth standpoint if a huge opportunity prior to covid we have markets in the united states are only available in the us we had markets in the us rover. Third of the people were coming from other countries. And so we know that this is a business that overtime is gonna trend towards global network has facts kinda community and so building into that over the next two years part to me right now. We're really focused on outdoor stays that include tent camping. Rv camping that of course structures so glamping cavins yours are hosts. All the time are just totally insane. Hey i host amazing weekend workshops on harvesting lavender in distilling the lavender essential oil. Where i do an incredible outdoor dinner with like alive band and i'm only thirty minutes outside of nashville and like hip camp lease become a home for all these ways that people want to get outside. Be it something where they're spending the night or just coming for dinner or potentially coming for a whole week. I think overtime building out a platform that is truly about connecting people in the land in all the ways that might happen is an important way for us to create our hosted also important way to really build a community that uses the platform in a way that is most relevant to them. Not everybody wants to see that side all the time you know i for one can't wait for all three and i knew your supply constrained and that's a key part of the story here even with that in mind. What is bad supply. What are things that you've had to say no to like. You are having a point of view and saying no. This does not belong on. The platform even wants to be actually. I'm a bit of trauma around is so it's so interesting marketplace's when they're working if you're not careful they can really get away from you and that actually happened to us in two thousand eighteen. We've found facebook ads and we were like allow all the supply. We can create so quickly. This is amazing. What have we been doing calling all these landowners by ads as the guys are actually still in private strategy as other digital hours by the time we were just kids in a candy store as investors cozy the crap you got hooked on the whole girly sounds about right. We want to grow supply really quickly very exciting. It's only really are second or third year of doing this. We're likely figured it out. We've cracked the code. And then this weird thing happened. Where the average percentage of people leaving positive reviews started the ratio of safety or experienced issues where people had a bad enough experience they were reaching out to our support team started increasing and we started hearing from local regulators. Who were concerned about what we were doing for the first time ever at all of this started happening kind of really quickly as so many of these things have been you. Have this random called random coincidence. You have this moment where you're just in the right place of the retirement. In this case i was in l. a. I think for he'd be like an interview. Maybe like a news thing. I wanted to find a hip. Campus day at bet knights l. a. And i was like you know. Maybe i'll just drive out of the city for a couple of hours ahead this time. Find a cool ranch to stay on in malibu or out in out in the mountains. My feed my search result i was in west hollywood at the time became populated with dr ways of parking lot in hollywood where you could sleep in bunk beds someone had put in a semi trucks that while technically i guess outdoor comedy was just not about nature not about the land and not about getting outside and had some traction by the way into those the thing our previous quality metrics that planet time we had cue. We were looking at les chiens but as long as they were getting books. We're like okay. I guess the community wants them. Like we don't wanna have too heavy of a hand and saying yes. No yes no but that experience changing forever. I was actually. I think on the phone with sarah call right after chapel events and i was like. Oh my gosh you have no idea how people are. You have gap here. This is so weird. I just don't think this is right is one of the hardest decisions that had to make a ceo but we ended up creating a set of ho standards. We created new requirements. Like you've got to have at least two acres in addition to many other things and then we actually went through the very painful process of awkward in about a quarter of our community that one in four host we had to do and we call them all. It was terrible. We had to call them. Hey so sorry. We know that this is probably creating some level value for you is actually isn't in line with their standards. And here's our standards and here's where you don't map. In some cases people were able to close the gap in some cases. They weren't hard experience to may twenty nine. Eighteen lillies the first half of the year pretty hard year for growth because we were already supply constraints just at the corner of the safai we had but it was absolutely the right decision and allow us. In twenty nineteen to build much stronger processes around quality control around looking for those early indicators. We now have a whole system set up. Where if we see someone who has enough of those kind of indicators early on where we're looking at proactively and having those conversations us a much higher by base it's incredible story because matt mullen wag the wordpress founders there's some balance between like centralization decentralisation like open closed networks and that the problem with open networks is that some weird bad stuff can start to happen and equality filter almost necessarily as a centralized function employed by someone of the point of view. And there's a happy medium. It's an amazing story. For other entrepreneurs i would love to understand the business model itself and it might be a remarkably simple and short answer. Which is there's gmv or. I don't know what you call it there's bookings gross bookings and you take a percentage of the bookings is that about as straightforward as it comes in. Is there anything you've learned about the nuances of that marketplace model. Whether that's take grade or something else that you think is potentially valuable to other entrepreneurs out there are business. Model is exceedingly simple trying very bravo. we have. gnv's gross marketplace volumes. we take a percentage of everybody and that is our only revenue stream. We have said no many times over to advertising or any extra psyched focused. Like this is an incredible scalable. Business model has very excellent margins. Like let's focus on scaling this one model so it's pretty simple business. This is actually fairly recent a really interesting powerful thing. We're gonna have to reckon with. Which is that our vote for him as we start to build out. More and more tools in functionality is now able to serve a more professional host so previously the average has done hip cam has about two sites but half of them only have one on their property. And for those in general. I'll talk to them. The successful often asked. Like what are you thinking about artillery. Should it be lower in their legs. No ed rather you spend more on building messaging in the mobile app for me or something like okay. Okay that makes sense. Now as our platform gets more professionalized. Our customer base starting to move that way and so now we have hosts in addition to these incredible new hosts that actually have full camping business. They have fifty different sites across hundreds of acres. They have one hundred sites and they're coming in with a whole new expectation of what they want from us. Business model wise. I think one big thing we've been racking with is. How do we work with partners. Who are able to generate a of their own demands so for a lot of these businesses. There's not great campground booking saw there. They want us hip camp for their whole business but they've got a big web save. You've got a big instagram. They're sending us business all day every day. They're like we don't wanna pay to you. Take great that's kind of crazy. And so we've started to really have those conversations that i think over time. We'll just have to develop different business models for different types of hosts anything else interesting about take great. Can you share your take on off. It's public information. And how did you think about setting it. Yeah it's actually changed. I think originally charged twenty percent or fifteen percent to our host and we had no bookie face. I didn't like booking and that it was as a customer. I don't know segues one of the most annoying things on airbnb as like when he finds something amazing Editor so different from the price on the search page. Does that too now because it makes sense. So here's why so. We started that way in my mind. It was like well. If these hosts should recognize the logic in wanting to build a note booking the platform and they should just charge more will what actually happened was a huge amount of early hosts. Were like. this is so unfair. Why do we have to pay the full fees. Wire the campers getting to pay nothing. That feels like not. The sharing economy sharing economy should be shared. These we ended up pilot started a pilot where we then took that. See it or a total take grades a little over twenty percent and we split it so is about ten percent on the host site unlike a similar amount bearing on the size of transaction rate for bigger transaction. You take less More on the demand side in there was no impact to conversion on checkout. That was are really good. Learning for the company is a good lucrative humility. For me where you've had to come in with this r