Pattern Breakers: How to find a breakthrough startup idea | Mike Maples, Jr. (Partner at Floodgate)

Mike Maples, Jr. is a legendary early-stage startup investor and a co-founder and partner at Floodgate. He’s made early bets on transformative companies like Twitter, Lyft, Twitch, Okta, Rappi, and Applied Intuition and is one of the pioneers of seed-stage investing as a category. He’s been on the Forbes Midas List eight times and enjoys sharing the lessons he’s learned from his years studying iconic companies. In his new book, Pattern Breakers: Why Some Start-Ups Change the Future, co-authored with Peter Ziebelman, he discusses what he’s found separates startups and founders that break through and change the world from those that don’t. After spending years reviewing the notes and decks from the thousands of startups he’s known over the past two decades, he’s uncovered three ways that breakthrough founders think and act differently. In our conversation, Mike talks about: • The three elements of breakthrough startup ideas • Why you need to both think and act differently • How to avoid the “comparison trap” and “conformity trap” • The importance of movements, storytelling, and healthy disagreeableness in startup success • How to apply pattern-breaking principles within large companies • Mike’s one piece of advice for founders • Much more Pre-order Mike’s book and get a second signed copy for free. Limited copies are available, so order ASAP: https://www.patternbreakers.com/lenny. Brought to you by: • Enterpret—Transform customer feedback into product growth: https://enterpret.com/lenny • Anvil—The fastest way to build software for documents: https://www.useanvil.com/lenny • Webflow—The web experience platform: https://webflow.com Find the transcript and references at: https://www.lennysnewsletter.com/p/how-to-find-a-great-startup-idea-mike-maples-jr Where to find Mike Maples, Jr.: • X: https://x.com/m2jr • LinkedIn: https://www.linkedin.com/in/maples/ • Substack: https://greatness.substack.com/ • Website: https://www.floodgate.com/ Where to find Lenny: • Newsletter: https://www.lennysnewsletter.com • X: https://twitter.com/lennysan • LinkedIn: https://www.linkedin.com/in/lennyrachitsky/ In this episode, we cover: (00:00) Mike’s background (03:10) The inspiration behind Pattern Breakers (08:09) Uncovering startup insights (11:37) A quick summary of Pattern Breakers (13:52) Coming up with an idea (15:30) Inflections (17:03) Examples of inflections (28:02) Insights (36:49) The power of surprises (47:31) Founder-future fit (55:28) Advice for aspiring founders (56:33) Living in the future: valid opinions (58:32) Identifying lighthouse customers (01:00:45) The importance of desperation in customer needs (01:03:49) Creating movements and storytelling (01:24:14) The role of disagreeableness in startups (01:34:34) Applying these principles within a company (01:40:35) Lightning round Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email [email protected]. Lenny may be an investor in the companies discussed.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Lenny Rachitsky?

  You've found that there's basically three elements of most breakthrough startup ideas.

• 0:04Speaker 01

  The three are inflections, insights, and then founder-future fit. Business is never a fair fight. What inflections let the founder do is wage asymmetric warfare on present.

• 0:14Lenny Rachitsky?

  You reference this term that you use occasionally, this earned secret.

• 0:17Speaker 01

  The way inventions happen is people get their hands dirty, being awake to the possibility that secrets are there. If you're living in the future and you notice what's missing, your intuition about what to build is far more likely to be right.

• 0:30Lenny Rachitsky?

  This connects with that stat that you shared that 80% of your biggest returning investments came from a pivot.

• 0:34Speaker 01

  So startup never beats a big company by executing better. The way startups win is because it proposes a radically different future, disorients the incumbent, and chaotically moves people to that different future. The rock is the inflection, the slingshot is the insight, that David shoots at Goliath. We're looking to create the conditions where we're going to get to play an unfair game by unfair rules that favor us.

• 1:00Lenny Rachitsky?

  Today, my guest is Mike Maples Jr. Mike is a legendary early-stage startup investor, and with his firm Floodgate, which was founded over 20 years ago, was one of the earliest pioneers of seed-stage investing as a category. He's made early bets on transformative companies like Twitter, Lyft, Twitch, Okta, Rappi, and Applied Intuition, and has been on the Forbes Midas List eight times. More recently, he's been spending a lot of his time researching where great startup ideas come from and what separates the startups and founders that break through and change the world from those that don't go anywhere. After spending years reviewing his notes and decks from the thousands of startups that he's met with over the past two decades, he's uncovered three ways that breakthrough

• 1:44Lenny Rachitsky?

  founders think differently and act differently. In our conversation, Mike shares what he's uncovered, along with the pitfalls that he's seen many founders and startups fall into, how to apply these pattern-breaking principles to large companies, and so much more. I've never seen anything like this sort of research done before on early-stage investing and startups. And if you're a founder, a product builder, or an investor, this will change the way that you think about building successful products. Also, as an added bonus, Mike has offered listeners of this podcast a very cool offer. If you preorder the book at patternbreakers.com/lenny, you will receive a second signed copy of the book for free. There are a limited number of copies available of this offer, so if you're interested, I'd encourage you to place your order ASAP.

• 2:29Lenny Rachitsky?

  The book is coming out July 9th. So to take advantage of this offer, go to patternbreakers.com/lenny. With that, I bring you Mike Maples Jr.

• 2:43Lenny Rachitsky?

  Mike, thank you so much for being here and welcome to the podcast.

• 2:47Speaker 01

  Lenny, thanks for having me. It is absolutely an honor.

• 2:50Lenny Rachitsky?

  It's my honor. What we're going to be talking about in our conversation today is how to come up with a startup idea and how to take the first few steps to make that idea real. You have a book coming out that is exactly this, helping people understand how to do this. It's called Pattern Breakers: Why Some Startups Change the Future. Let me just ask kind of a broad question. You're a very busy, very successful investor. Why did you decide to write a book?

• 3:19Speaker 01

  Yeah, and like a lot of things in life, it was kind of an outgrowth of an accident and an outgrowth of being down a certain rabbit hole. So you know, about 10 years ago, Twitch was acquired by Amazon for 970 million. And we made something like 85 times our money. And normally you'd think that's a really good thing. It was a good thing. But I had forgotten that I was even a shareholder in Twitch. And so I had to go to my LPs and I had to explain to them, "Hey, I'm sorry, I don't have this in my financial statements, you know, but do you want me to restate them?" And they were all like, "Nope, we're good. Just send us the money." And some of them even sent me like bottles of champagne and stuff, and the good kind. Then I started to kind of feel a little bit unsettled.

• 4:04Speaker 01

  Because so, how was I a shareholder in Twitch? I'd invested in a company called Justin TV that had morphed into two companies, SocialCam and Twitch, and then SocialCam got bought. And so I just thought that was the company. So then I looked at, I'd been investing for about 10 years, and I noticed that like 80% of my exit profits had come from pivots. And I also noticed that like all the ones that had seemed to do well, didn't necessarily follow the best practices that everybody talked about. I didn't, I didn't see the Twitter guys doing the business model canvas, for example. And I didn't see the Justin TV team, even as they morphed into Twitch, being who I would hold up as like the most functioning management team I ever saw.

• 4:50Speaker 01

  Right? A lot of it was pretty crazy and wild and random. And, and a lot of, at the same time, I was helping founders shut down their companies. And they had seemed to do all the right things. They'd done the business model canvas. They'd done customer development. They'd done all the things you're supposed to do, hired well. They would have been a Harvard Business School case study, except for the fact that they failed. And so the genesis of this project was really like, okay, should I just retire before I get exposed? Is this just all random? Am I just lucky? Or is there something else worth understanding? And as I, as I started to develop conviction about what those things were, I started to talk to people about it. A lot of people said, oh, you should write a book. Founders ought to see this. It'd be really valuable for, for their

• 5:34Speaker 01

  thought process and coming up with their startup ideas.

• 5:38Lenny Rachitsky?

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• 6:21Lenny Rachitsky?

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• 6:40Speaker 02

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• 7:24Speaker 02

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• 8:09Lenny Rachitsky?

  Amazing. I'm even more excited to get into the meat of this. I was already excited. Before we get into that, just can you share a bit about the work that you did to uncover these insights? I know you have hundreds of decks of all these early-stage companies you've looked at. What is the work that went into this?

• 8:23Speaker 01

  Yeah, so there's a movie that came out a few years ago called Trainspotting, right? And there's these guys, these dorky old British guys in anorak coats who chart the comings and goings of trains like it's the most interesting thing in the world. They put it in their journals and everything. I'm that way when it comes to startups. So I have a database of... Any startup where you would have made more than a hundred X on your first check? And what I want to do is I want to get a time capsule for those startups. I want to understand what did it look like? Not after it succeeded, but what did it look like at precisely the time you would have needed to decide whether it was an interesting opportunity?

• 9:05Speaker 01

  So I have the original pitch deck for what was at the time called Airbed and Breakfast, which I foolishly passed on and you seem to have made a good career decision in joining. A little later, but yeah. And you know, I have the, I have the pitch deck for Pinterest. I have the pitch deck for all of these that we either, either passed on or said yes to. And the, the, the reason I want to do that is it's easy to misremember how things really happened. Uh, and what I find is even the founders themselves, we, we have a tendency to remember knowing more than we really did at the time. And so, you know, I really wanted to do the best job I could of understanding exactly what it was like. What were the, what was the origin story of this idea?

• 9:51Speaker 01

  How did they come up with it? If they pivoted, what caused them to pivot? You know, when did they first start to encounter success? What was the reason for that? All those things and, and I had to be really careful in the questions that I asked because you like, for example, you don't ask, why were you successful? Because then they'll, they'll offer their reasons they thought they were successful. What, what, what you want to do is you want to say, okay, I noticed here's the seed pitch deck and you called the product X, but now the product's called Y. When did you make that change? Why did that happen? And so you're trying to do the very best you can of asking a very non judgmental set of questions that are going to give you a non judgmental set of answers.

• 10:32Speaker 01

  So that you can kind of be like a detective and get, kind of get to the root cause of why these things took off.

• 10:37Lenny Rachitsky?

  Incredible. And I think what's also important is you have access to more data and more unique data than most other people because you invest so early stage.

• 10:46Speaker 01

  Yeah, I think the other thing is I just have a pretty simpatico relationship with founders usually. And so I can kind of push for the real. And they're not, you know, I'm like, look, I'm not gonna, I won't share anything you don't want me to share. I'm just trying to understand. And so, so, you know, you, when you have kind of these informal relationships, that's the other thing I learned is you try not to show up in a conference room interviewing them like a normal interview. You try to, you try to glean these facts over time with informal discussions and, you know, in the midst of talking about other things as well. And so, so I think that that was part of what was really valuable about the exercise was the

• 11:26Speaker 01

  sort of the opportunity to get the unvarnished wild story of what really happened.

• 11:32Lenny Rachitsky?

  Amazing. Okay. So let's get into it. Your book's basically broken up into kind of two parts. How to come up with an idea and then the actions you need to get right to move forward an idea. And you have a really cool way of framing how to do this and then we'll get into it, but maybe frame the, these two parts real quick.

• 11:51Speaker 01

  Yeah. So I'll give it my best shot. I mean, the, the main thing is that business is never a fair fight. So the incumbents start out with an advantage. And the default is they will maintain their advantage. And so the startup has to decide that it wants to fight unfair. And so how does a startup fight unfair? It has to harness a different set of powers than are obvious to most people, right? So, so for example, better doesn't matter when you're a startup. Because better is an extension of the present. Better is when you think the future will resemble the present, but only be slightly different. The way startups win is by being radically different.

• 12:36Speaker 01

  A startup wins by avoiding the comparison trap entirely. So like when, when Lyft launched ride sharing and then Uber closely followed, right, with Uber X, nobody after riding a ride share said, oh, how's that different from taxis? Right? It was just self-evident how different it was. And so like, that's what, what we mean by forcing a choice and not a comparison. So the startup capitalist, it turns out is a different type of capitalist, right? A corporate capitalist makes money by persistently compounding, makes money by extending their advantage, makes money by having a moat, makes money by, you know, doing things well over and over again

• 13:21Speaker 01

  in a compounding way. Startup has none of those things. There's nothing to compound. And so the way a startup wins is they just change the subject. They did not the premise of the rules and proposed something completely different. And that was the original notion behind pattern breaking was you want to have an idea that just radically breaks the pattern that can't be compared to anything that's come before. And that's when the startup has a chance to play offense.

• 13:47Lenny Rachitsky?

  So coming back to the two parts are coming up with the idea and the actions that you got to take. So let's dive into coming up with an idea. And this is where I want to spend most of the time because I think this is where most people get it wrong, where everything starts with the idea. So I think there's a lot of meat here. And what I love about your book is you have a very succinct, limited number of things that you've uncovered that are elements across successful companies, pattern breaking companies. So within the idea bucket, you've found that there's basically three elements of most breakthrough startup ideas. Can you share the three and then let's talk about each one?

• 14:24Speaker 01

  Yeah, the three are inflections, insights, and then what I call founder future fit. Or another way I phrase it is, is this from the future? But those are, those are the main three things that I've observed tend to suggest breakthrough potential. And here's an important thing. You'll notice I didn't say the implementation, right? So one of the things that I learned is that if you have the right insight, and we'll get to some of this, you have a first mover advantage into the future. And so a lot of times your first implementation won't be right. But if your insight is correct, you can navigate the implementation to the right implementation to get product market fit. And so, but what we need to understand is

• 15:08Speaker 01

  There need to be these underlying forces underneath the idea to give it the power to escape the gravitational pull of the present, right? That's what we want. We want a set of powers that we could observe that make it worth pursuing and make it worth navigating the product to the ultimate place.

• 15:25Lenny Rachitsky?

  So let's talk about the first power. You call it inflections. What is an inflection? Why does it matter? What does inflection look like?

• 15:32Speaker 01

  An inflection is an external event that creates the potential for radical change in how people think, feel, and act. Inflections happen external to any startup or any company for that matter. So we brought up Lyft a little bit ago, so maybe we'll use them as an example. So the inflection that enabled Lyft was the iPhone 4S shipped with a GPS locator chip. And one of the things that that illustrates is, for example, Moore's Law is not an inflection. You know, an improvement curve is not an inflection. An inflection I'm a little persnickety about, it's a turning point. And so, you know, in math, it's a turning point on a curve where the slope changes.

• 16:16Speaker 01

  But in tech startups, it's a point in time where something new gets introduced that creates new empowerment for the first time possible. And so, you know, people talk about timing and why now? Inflections for me were the unlock. You know, you could have, you could have had the idea for ride sharing before the iPhone 4S, but it wouldn't have mattered because the riders and the drivers wouldn't have been able to locate each other well enough. If you'd waited too long after the iPhone 4S, it would have been obvious. And so there was this window of time, this magical moment when a new type of empowerment was possible for the first time ever. And the companies that the founders who understood that were in a position to offer

• 16:59Speaker 01

  that kind of empowerment in the form of a radical product that changed the future.

• 17:04Lenny Rachitsky?

  To make it even more real for people, what are some other examples of inflections, either in the past and the present?

• 17:10Speaker 01

  Another example would be the cameras getting better on the smartphones, which enabled Instagram. So Instagram was at the convergence of a few inflections. First of all, there were smartphone adoptions, so there are just more of them. And so they crossed like 10 million smartphones, but then you had the cameras getting a lot better. You had more of them connected on Wi-Fi. You had the networks having better upload speed for smartphones. So all those factors converged and made it possible for Instagram to offer a product that was good enough to take most of your photos with. You know, you didn't start to think, oh, I need a digital camera separate from my smartphone. Now I can just use my smartphone everywhere I go.

• 17:55Speaker 01

  But you know, Instagram could have come out in 2008. It probably wouldn't have worked. It probably, or it wouldn't have worked to the extent that it did. You know, it's, it's window of timing was just right. What are some other examples? You know, the locator chips in the smartphones powered other companies as well. Powered DoorDash, Instacart, they, they had different insights, which we'll get to, right? But they, there were, there were lots of different ways to harness that power. One thing I love about inflections, and this, this kind of goes really old school, is just because you have a power, doesn't mean you know how to use it, right?

• 18:33Speaker 01

  So like, um, the wheel was mounted horizontally for like 500 years before somebody mounted it vertically. So originally people used the wheel to make pots. And that was a good innovation because it accelerated making pots. But then somebody decides to mount it vertically. And now they're, now you're propelling wagons and you know, you just change transportation entirely. And so most people don't realize that the thing that's underneath us, or the thing that's in our hands, or the thing that's in our pocket. Might have a power that when unleashed could change the future. And it's one of the very special things about founders that are great is they recognize, they notice things that we don't know.

• 19:18Speaker 01

  All of us tend to just follow the patterns we've always followed. Most of us tend to assume that tomorrow be similar to yesterday. But sometimes the founder will notice an inflection. And I find that kind of inspiring because inflections are all around us all the time. But most of us don't just don't bother to look. You know, most of us are so busy going about our day to day that we don't notice the emergence of a new empowering thing right under our nose or right in our pockets. Uh, but some founders do.

• 19:49Lenny Rachitsky?

  It makes me think about chat GPT when it came out. It was sitting on top of an existing model and it just gave people a new interface to use it. And all of a sudden everyone crazy, they're like, oh my God, that's the future. But it was already there. It just, you couldn't chat with it the way that people wanted to chat.

• 20:04Speaker 01

  Yeah, you know, like, uh, uh, Michael Saylor, once I was talking to him and he said, you know, the, the Romans could have invented the printing press a lot earlier. They had sandals that would make marks in the mud. You could have in theory drawn the connection between those marks in the mud and the ability to have movable type and letterpress. But nobody did, right? And so quite often these inflections will go, they'll just go unrecognized for a while. But they're always there, like they're always there. They're, they're there right now. Uh, you know, in the ambient atmosphere, there's somebody about to harness an inflection that most of us would just walk right by and never see.

• 20:44Lenny Rachitsky?

  Wow, my mind is racing. What's out there right now? Uh, obviously AI is top of mind for a lot of people. I know you're stickler for what is an inflection, what is not? Do you consider AI an inflection?

• 20:55Speaker 01

  Uh, I would say that I would probably be a little more specific about it. So I, I might say that certain, uh, large language models are an inflection. Because like what, when I, when I think about an inflection and one of the, one of the things I emphasize in the book is, uh, stress tests. So like, it's funny, founders never really come to me and say, hey, can you help me come up with a good idea? Right? They would think they're weak sauce if they had to do that, right? So usually what's the more common occurrence is they'll say, I've got this idea. What do you think about it? And so what I can say to them is it's not my place to have an opinion. But like, let me just ask you, does it embody one or more inflections? And if it does, there's a few, we could stress test that. We can say, what is the specific new thing that was just introduced?

• 21:40Speaker 01

  How does it empower people? How does it specifically empower specific people in specific ways? And under what conditions might that empowerment be realized and under what conditions might it not be? Because like, nuclear power has existed for a long, long time, but we haven't built any nuclear power plants in 50 years. And so, just because you have a power, doesn't mean it's going to get used. It could get regulated out of existence. Customers could decide they don't want it. And so, we want to answer all three things. What's the specific new thing? What is the specific form of empowerment it offers and to who? And under what are the empowerment conditions? So like with the inflection for Lyft, the inflection was, the new thing was the iPhone 4S with a GPS chip.

• 22:25Speaker 01

  The empowerment was, you can locate anyone within one meter accuracy with an algorithm. And that's going to be pretty much anybody with a smartphone, and that's a lot of people. And, you know, in order for this to be met, people are going to have to want to share their location information with applications. The government's going to have to not outlaw GPS chips in phones. Apple's going to have to keep wanting to ship GPS chips in phones. And we felt like those were pretty reasonable bets, right? We felt like it's pretty likely those empowerment conditions.

• 22:58Lenny Rachitsky?

  Amazing. I was just going to ask for an example. You already provided one. What about in terms of Twitch? What was the inflection there?

• 23:04Speaker 01

  I think there were a couple. The first was the the shift towards user-generated content and sort of internet celebrities. Justin Khan wanted to be an influencer before there was a term to describe it. Right? He was really building the product that he wanted for himself. But, you know, right before Twitch or right before Justin TV, which was the original company. Times Person of the Year had been you and they had YouTube on the cover of the magazine. And so you had, that was a major turning point in how entertainment was happening. But simultaneously broadband penetration had reached critical mass. You had, the CDNs were getting really good and, and, and we thought that they would get better.

• 23:47Speaker 01

  And so, you know, you, you, you were in the, a situation where the conditions to live stream video for the first time broadly over the internet were being met. Whereas, you know, you, you couldn't have done that even two years before. In fact, Kyle Vogt had to invent some pretty miraculous stuff to even make it work when they did. But you could, you could see how, okay, once, once videos start streaming on the internet in real time, that could be a thing, right? You could just see how that would be a thing if it, if it worked. And so I'd say those are the inflection, you know, Airbnb, a company close to both of our hearts for different reasons, they benefited, I think, from a couple of things. One was the proliferation of customer reviews online and people's trust of reviews as a

• 24:31Speaker 01

  substitute for trusting the brand of a hotel. But then also Facebook Connect made it possible to pass people's profile information. And so the guest and the host didn't quite seem like as much of a stranger as they might have. And so there were a few things that, that happened at the same time. And then the great financial crisis. And so you had people upside down on their houses needing to find some way to generate income. And so all of those things came together at the same time to help Airbnb.

• 25:00Lenny Rachitsky?

  The examples you shared are a good reminder that the inflection doesn't have to be technological. You shared a few of the categories of types of inflections. Can you just do that again?

• 25:08Speaker 01

  I love that question and I'm glad you reminded me, right? Because like, like here's, here's a really recent example. When the, the laws were changed because of shelter in place for telemedicine visits, you know, it, it used to be illegal to do a telemedicine visit across state lines. But now, all of a sudden, with COVID and shelter at place, not only was it made legal, but it could even be reimbursed by the healthcare system. And so that's an inflection because it empowers patients to access more doctors and it empowers doctors to access more patients. And it also changes the delivery mechanism in an empowering way. In no event was that a technology change, right?

• 25:49Speaker 01

  That was a regulatory change that allowed technology to be empowering in new ways. But, you know, it was a specific new thing that meets that condition. It empowered specific people in specific ways. And there was a new set of empowerment conditions that ended up being made. And one of the, one of the things that we would ask at the time was, are they gonna, you know, once COVID shelter place goes away, are they gonna revert back to the old laws? And if they did, that would have been a problem. And so that would be the empowerment condition. Um, but, but, you know, it's a, it's a fairly robust way of stress testing any inflection, right? Is to ask those three or four questions.

• 26:27Lenny Rachitsky?

  So there's regulatory inflections, big changes in regulation, there's technological. There's also, I think you implied like an attitude, like the way people see.

• 26:34Speaker 01

  Yeah, there can be a belief inflection. You know, so for example, uh, during COVID, the amount of telemedicine visits exploded. And so as a result, there was a permanent change in people's belief about whether they would want to do a telemedicine visit. Before that, the technology was there, but a lot of people just didn't do it. The doctors didn't want to or decide to, the patients didn't want to decide to. But now all of a sudden, people were doing it, they're like, this is much better. I'd much rather do it this way than go visit the doctor and wait in line and all that stuff. And the doctor's like, I'd much rather do this than, than, you know, have these people backed up in my, my office. You know, I, I would argue that, uh, you know, here we are doing a podcast on a video, uh, platform, right?

• 27:18Speaker 01

  Even though it's not Zoom, I, I would say that Zoom was another example, you know, the, the idea of, um, people working from home, a reasonable number of days a week is a permanent condition. And I think is another inflection that happened with COVID.

• 27:32Lenny Rachitsky?

  And so are those the three regulatory, technological and belief?

• 27:35Speaker 01

  Those are the main ones, you know, and I would say that in in in many ways, it's um, you could say that from a macro point of view, it's two things. It's technology changing enablement and it's people socially changing their beliefs and their patterns of behavior. Uh, and and either one of those changes can be an inflection because either one of those changes can represent a turning point in one's capacity to change the future.

• 28:02Lenny Rachitsky?

  Amazing. Okay. So we've talked about inflection. The next bucket is and the next element of breakthrough companies that you found is an insight. Talk about that.

• 28:11Speaker 01

  Yeah. So an insight, unlike an inflection, an insight does come from the founders. Uh, an insight, I like to say is a is a non-obvious truth uh, about how one or more inflections can be harnessed to change people's behavior. So if in the example that we gave earlier with Lyft, the inflection was the iPhone 4S. Insight was, oh, that means you could do Airbnb for cars. And so you had to, you had to have some type of a creative insight to see that. Now, what was, uh, you know, what was non-obvious about it or non-consensus about it? Who's going to want to get in a stranger's car? That's crazy, right? And um,

• 28:53Speaker 01

  thank God, I mean, if there's one piece of goodness about us passing on Airbed and Breakfast design, Anne and I were like, man, you know, nobody's gonna want to stay in a stranger's house. That's crazy. And at the time, Airbed and Breakfast, the host and the guest stayed in the house at the same time. And the, you know, the the host would feed Pop-Tarts or something like that to the guests the next morning. We're like, you know, this is right around the time they like the Craigslist killings and stuff. We're like, this is just scary, you know, kind of crazy. Uh, you know, couch surfing is a service, you know. But by the time uh, we we saw what was Zimride at the time, what became Lyft, Anne and I were much more prepared to believe that insight than we would have been, right?

• 29:34Speaker 01

  Because we'd foolishly passed on Airbnb. So that's a really important aspect of insights, right? So the the insight needs to leverage inflections. But this is the subtle part. It needs to be non-consensus and right, not just right. So. In the world of opportunities, if you're right and consensus, you still don't do that well. And an idea that is right, but consensus has a couple of problems to it. One is if it's consensus, it's probably not radical enough. Because you know, when you think about it, human beings are conditioned to like things. And so if everybody likes your startup idea, it means it's too similar to what they already know,

• 30:19Speaker 01

  what they're familiar with, which means it's probably too similar to the consensus. It's too similar to the incumbents. And so the best startup ideas have this trait where most people don't like it or are even hostile to it, or just kind of meh about it. But some subset of people are just like, oh, my God, where have you been all my life? This is amazing. I love this. But you know, they fall irrationally in love with the idea. And so most of the great startups that I've seen have that attribute to them. And, and the reason is that a great startup, unlike, unlike a conventional company that proposes the future as an extension of the present. So that normal companies forecast, they say, I'm going to look forward from the present

• 31:04Speaker 01

  and forward project what the future will be. Great founders, pattern breakers, backcast. They say it's, it's, it's a, it's a given that the future has to be radically different for me to be a big winner. And so I'm going to look for radically different futures and work backwards from those radically different futures. And so the radically different future comes from that thinking different, thinking non-consensus. And then it's, it's the different actions that get you to say, okay, now I'm out in this different future. But right now I'm all alone in this different future. I have to get people to come join me in that different future. And I have to find people who are ready to move with me to that different future. And that's where the pattern breaking actions come in. And like, not everybody's going to move at first.

• 31:49Speaker 01

  And so I can't waste my time with people who won't move. I can't waste any ergs of energy on anybody other than those ready to move or about to. And then I need to co-create the future with those early believers. And so great startups happen when a subset of people in this world buy into the founder's insight and then move with them to co-create that future. And then eventually what was a heresy becomes the conventional wisdom as more and more people start to realize the advantage of it.

• 32:19Lenny Rachitsky?

  There's so many threads I want to follow here. One is the Airbnb story. Interestingly enough, I had Jessica Livingston on the podcast recently and you probably know this, but Paul Graham and her did not like the Airbnb idea. They all like, this is a terrible idea. This, we were just, we were going to assume they will change the idea, but we love the founders. We're going to take a bet on.

• 32:35Speaker 01

  So I was introduced to the guys by Michael Seibel from, who was one of the co-founders of Justin TV Twitch. And Michael introduced me to Brian Chesky before they applied to Y Combinator. So like, like Michael's like, they're not even close to ready to apply to Y C. But like, you know, he thought that I was maybe would think that it was the right kind of crazy. I get pitched by a lot of like, uh, I'm, you know, I'm not very off put by crazy ideas.

• 33:03Lenny Rachitsky?

  I could see why.

• 33:04Speaker 01

  So it was, uh, and the meeting was totally discombobulated, right? So a room full of cereal boxes. I'm like, what's up with this? Why is there cereal here? And then, and then he can't get the product to work. So we're like 20, and I'm like, okay, that's okay. Let's just look at the slides. And he goes, well, Michael Seibel told me that you don't like slides, you like demos. And I was like, that's true, but it's not working. So we're like 20 minutes into this meeting in a room full of cereal boxes, just looking at each other. And, and, uh, you know, you, you can't win them all, right? You win some, you lose some.

• 33:34Lenny Rachitsky?

  I wouldn't blame myself if I were you.

• 33:36Speaker 01

  Here, here's the other thing that's hilarious about Airbnb. So like, they, they do this thing because they can't pay their rent. They put up this WordPress site to pay for their rent because there's a design conference in San Francisco. In the meantime, they're brainstorming startup ideas. So they wanted to do a startup together, but like, never occurred to them at first that air, airbed and breakfast was like the startup idea. They're like, we just need to use that to make money so we can go do a real startup. And so that's the irony too, right? Is that, that, you know, you look back on it and almost smile at the fact that they didn't, they didn't know what they even had at first. You know, it was almost an accident.

• 34:13Lenny Rachitsky?

  There's a lesson there of like you find something that works and even if you don't think it's a big idea, don't take that for granted.

• 34:21Speaker 01

  Oh, I very agree. And the other thing, the other great lesson is, you don't want your initial startup bets to be too big to fail, right? You want, you want ideas that are small enough to fail a lot. Because you know, you don't want to be attached to success. You want to be able to just try things and play with stuff and tinker with things. Because you don't really know where the fractal of new insight is going to reveal itself. Uh, and so you, you know, there is a little bit of play to this, uh, that I think is pretty important.

• 34:53Lenny Rachitsky?

  Do you remember what, what some of the ideas they were brainstorming, by the way?

• 34:56Speaker 01

  I, I don't, right? And I wonder if even they do, right?

• 35:00Lenny Rachitsky?

  Probably not, probably not.

• 35:01Speaker 01

  The Airbnb story, right? In your book.

• 35:03Lenny Rachitsky?

  I feel like them, uh, failing in your demo helped prepare them for YC and that's what helped them get in. So I think that you're a big part of their story.

• 35:10Speaker 01

  And to make it even more painful, like I'm in the book, right? Somebody, somebody called my wife Julie the other day and said, is that your husband in the Airbnb story? And we, we get the, we get the book and there's a chapter and it talks about how hard it was to raise money. And they weren't dissing on me as a dumb VC. They were like, you know, look how bad we were at presenting this at first, right? It was just a complete catastrophe presentation. Uh, but that's another good lesson for me too. I learned a very permanent lesson from that, which is just because the presentation is good or bad, it has nothing to do with whether you should necessarily invest or not. Sometimes you have to be awake to the possibility of what it's going to be, regardless of how messed up the presentation is.

• 35:55Lenny Rachitsky?

  What was their evaluation at that point?

• 35:57Speaker 01

  Oh God, um, this hurts to, I think, I think he offered me a chance to invest at a $1.5 million valuation.

• 36:06Lenny Rachitsky?

  Another $100 billion business.

• 36:08Speaker 01

  Oh, yeah, I would have made like 6,000 times my money or something like that.

• 36:12Lenny Rachitsky?

  Okay, great.

• 36:13Speaker 01

  Thank God, you know, thank God I said yes to Twitter and Just TV and, you know, we said yes to Lyft and Okta because if it if we'd seen all of those and passed on all of them, I'd, you know, I've got, I'd be apoplectic.

• 36:28Lenny Rachitsky?

  That's, I think that's what's interesting about your stage of investing is you, you just need a couple to work out for you to win.

• 36:34Speaker 01

  Yeah, that's right. And by the way, it's true when you're a founder too. You, if you do this right, you only have to be right once. Right? And so that's, that's really important.

• 36:45Lenny Rachitsky?

  Coming back to the insights lesson, one thing that you brought up when we were chatting about this is the importance of being surprised and the power of surprises. Can you talk a bit about that?

• 36:54Speaker 01

  Yeah. So, so there's a couple of things about insights that I think are really important, and this is one of them. I believe that there can't be a recipe for breakthrough. So, you know, and why is that? Well, recipes exist for things that have already been discovered. So if I give you a recipe for making a cake, somebody has probably made that cake right before the exact way they're defining it. And so breakthroughs, though, by definition, haven't happened yet. They haven't been discovered, right? The general theory of relativity had to be discovered by Einstein, right? And, and the, you know, the idea for ride sharing had to be discovered by the, the ride sharing companies or Airbnb by, by Chesky and Nate, those guys.

• 37:37Speaker 01

  And so what you want to adopt is the right mindset. And how do you adopt the right mindset? You, you interact with new technologies at the cutting edge. But you actively savor surprises. And when you think about it, when you think about it through the lens of a breakthrough and what we just said, it makes sense because if you want to find a breakthrough, you want to be surprised. You want to discover the undiscovered. You want to know something you didn't know before. Because if all you do is an experiment that proves that validates what you think. You didn't really learn anything when you think about it. You know, you just doubled down on your existing understanding or opinion.

• 38:20Speaker 01

  I learned this lesson from Scott Cook, who was the founder of Intuit. Whenever he would be presented a new product, people would present the idea to him and he would say, what were your three biggest surprises as you were coming up with this plan? And what he would find is quite often they couldn't name any. And he felt like when people can't name the surprises they came up with, they're too brain locked on what they want. They have, they have the agenda they have and they, they want validation rather than truth seeking. And so like if you're, if you're an authentic truth seeker, you're always hoping to be surprised and you think of surprise as a gift. Because you think, wow, maybe I encountered that surprise before anybody ever has. And so, uh, so that's kind of what we mean.

• 39:05Speaker 01

  And you want to construct your experiments so that you're in a position to be surprised. So a, a good example would have been what the guys at Chegg did. So Chegg was wanting to see if people would do textbook rentals. So they created a fake site called textbook flicks. But here's where Osman and Ayush were, were very savvy. Rather than just test whether people would rent a hundred dollar textbook for $35, they tested an arbitrary set of prices all the way up to $75. And so they had the demand preference curve at different prices. And textbook flicks wasn't a real site. So you'd get to the shopping cart and it would give you a 404 error. But we could tell that people wanted to rent textbooks.

• 39:48Speaker 01

  And the surprise was that they would rent them for more than we thought. We thought we need to get at least 35, but some students were willing to pay 75. And so that understanding was huge. If we'd only done an experiment to validate the hypothesis of, yes, well, they rent it for 35. Our pricing model would have been totally different from, oh, wow. And when you think about it, it makes sense. Like the student didn't want to keep the textbook, you know, econ 101, I'm going to give it back anyway. So 75 bucks is less than a hundred. I can buy beer with the extra money. So that would be an example of the surprise, but um. Most of the startups that have had great outcomes, I find there was a kind of a surprise like that, right?

• 40:30Speaker 01

  You know, being non-consensus is not the same as being contrarian. You know, being contrarian is another form of conformity because it's still relative to somebody else. Most of the great founders I see, they almost feel guilty that they found this secret. But they earn the secret by tinkering with the future and noticing surprises and having their noticing filter tuned to like volume 11, where most, most of us wouldn't notice it. Most of us would just pass the secret right by because we're looking to validate what we think is already true.

• 41:02Lenny Rachitsky?

  You referenced this term that is also one I love that you use occasionally, this earned secret. Can you talk a bit about that? It's basically the same idea that you uncovered something by trying things that no one else has seen yet. Is that the general idea?

• 41:15Speaker 01

  So to me, secrets are earned. Like, a lot of people, I think, have the wrong idea of what vision is. Like, a lot of people tend to think visionaries, it's like they have a special pair of binoculars and they can look out farther than the rest of us can. But, but in my experience, that's not how inventions really happen. The way, the way inventions happen is people get their hands dirty and they, they, they learn about what's missing in the future because they, they're, they're, they're getting their hands dirty with what's new about it. And so they earn the secret by going down this rabbit hole of exploring something at the cutting edge for its own sake.

• 41:56Speaker 01

  And they become like, just like I'm a trainspotter for startups, they become a trainspotter for this new thing that they're excited about. And, you know, they frustrate the people around them. They'll be at a party and everybody's talking about the basketball game and the Celtics against the Mavs. And, and somehow that reminds them of the fact that they want to test prices for textbook rounds. And it's like, but they're that interested. It's the last thing they think about when they go to bed, the first thing they think about when they wake up. And so that's where I find most of the really great earned secrets come from. They're earned in the sense that you earn them by getting your hands dirty and you earn them by being awake to the possibility that secrets are there or that just most people aren't looking.

• 42:39Lenny Rachitsky?

  This connects with that stat that you shared that 80% of your biggest returning investments came from a pivot. It all connects where you're just trying stuff, you're learning, seeing things people haven't tried.

• 42:48Speaker 01

  That's right. You know, and in the early days of product market fit, I like to say, we want to answer a very simple but profound question. What can we uniquely offer that people are desperate for? And if we have an insight, that makes us unique. Now, if a customer doesn't like your idea, a couple of things could be true. One is your insight could be wrong. If your insight's wrong, you don't have a startup, right? You should just stop. The other thing, though, that could be true is your implementation is wrong. So like you had the right insight. So like Okta, at first they wanted to do cloud systems management. They thought that they needed to do problem resolution. But when they showed it to customers, they were kind of meh about it.

• 43:32Speaker 01

  And they said, well, what, you know, why are you meh about this? And they said, well, it's not a top priority. And they said, what is your top priority? And they said, identity management. So they had the right insight, which was customers would struggle to manage cloud services, but they had the wrong implementation of the insight. So then they came back with identity management. It worked. So, you know, if somebody doesn't like your idea, if they're not desperate for it, either the insight's wrong, the implementation's wrong, or you could be talking to the wrong customer, right? Like some people that Okta talked to wanted to integrate it with on-prem software. And in that case, their opinion's irrelevant because they're not an innovative customer. They're not living in the future.

• 44:14Speaker 01

  They're not going to give you product requirement ideas that are additive to your strategy. And so, you know, you want to be right insight, right inflections, right implementation, right early believers that you're talking to as you iterate towards product market. And if you're not succeeding at product market fit, then it's one of those, one or more of those variables isn't working yet.

• 44:37Lenny Rachitsky?

  I think this might be a good time to remind people that you don't need to have every one of these for your business to potentially be a huge success. It's more that the more you have, the more likely it is that you will find something massive. Is that right?

• 44:49Speaker 01

  That's right. And it's like, this is the hard part about being non-consensus and right is you don't know for sure that you're right at first. You only know that you're non-consensus. And so you have to be willing to risk being wrong to be spectacularly right. And so what you're trying to do, though, is pursue opportunities where the odds are massively in your favor. And so like, I kind of return back to business is never a fair fight. And so if I'm a founder, there's a set, there's a universe of ideas I can pursue. The mistake that a lot of founders make, and it's very understandable. They say, I want to go after big market opportunities. So they analyze big markets. They find unserved customers with unmet needs in under-addressed markets.

• 45:34Speaker 01

  So then they go build a product to go solve that problem. And, and that's very appealing because it seems obvious and the dots connect forward in an obvious way. But unwittingly, it buys into a context. It buys into the current definition of the market, which was already set by the incumbents. And so what you instead want to do is pursue a slightly more ambiguous opportunity, but one that harnesses these powers, ones where you look at the inflection, you say, wow, that's really powerful. You look at the insight, you say, yeah, I know that this is going to be in the future. I know that this is where things are going to be radically different someday. I would rather have those things present and be willing to pivot the product

• 46:17Speaker 01

  than not have those things and have a much clearer idea of what the product should be.

• 46:22Lenny Rachitsky?

  Funny enough, one of my biggest investment successes did exactly what you're saying you shouldn't do, which is they looked at a huge market with a bad incumbent and built something better and it's working. But I think Again, it's not that you can't win that way. Your point and your research shows that your chances are a lot higher doing something totally different.

• 46:42Speaker 01

  That's right, and I would bet that this company, I don't, I don't know enough about it. I don't know what it is, right? But like, it wouldn't surprise me if they harnessed inflections in some way. That was disorienting to the incumbent. It wouldn't surprise me if they found a way to use inflections to fight an unfair bite. What I try to do with the insights is I realized there was a theory behind it. Like, a theory is not a recipe, it's explanation. And what inflections let the founder do is wage asymmetric warfare on president. And the insight is like the vessel that they use, right? It's, it's kind of like the, the rock is the inflection, the slingshot is the insight. That they shoot it at David, or David shoots Goliath, right? And so, so that's what we're looking for.

• 47:25Speaker 01

  We're looking to create the conditions where we're going to get to play an unfair game by unfair rules favor us.

• 47:31Lenny Rachitsky?

  Great segue to the third bucket, the third element of breakthrough companies, future founder fit. What is that?

• 47:38Speaker 01

  Yeah, so this is one of my favorites. So, a lot of times people will say, what makes a great founder? And there are some common traits, right? Passion for the idea, persistence, resilience. You know, all, all these things, right? That people talk about, passion for the users. But what I find is that there's no canonical best founder, right? So, Marc Andreessen started Netscape as a programmer making minimum wage at the University of Illinois. And everybody thought the digital highway at the time was going to come from Time Warner, or from Microsoft Network, or from the US government. Nobody thought that some kid was going to do it from the bottoms up.

• 48:20Speaker 01

  But it turns out that Marc was tinkering with a set of inflections around the world wide web. And, you know, right around that time, Microsoft introduced a better version of Windows. And right around that time, the Pentium processor came out. So there, you know, more and more people had graphical user interface computers at the very time that browsing started to happen. But let's take another company more recent, Applied Intuition makes simulation software for autonomous vehicles. If you're going to sell a giant contract to the CEO of a car company, he needs to look at you across the table and think, these guys can do the job, right? So, you know, Casser and Peter had been, they'd grown up in Detroit and Michigan.

• 49:04Speaker 01

  They had worked at car companies in the past, in the big three. And then they worked in, inside of Google at Waymo and Google Maps. And so, and they'd had a successful startup before. And so if you looked, what, what is a team from central casting to do this? It would be them. And so what I mean by founder future fit is there's a set of traits that a founder can have that make them ideally suited to a certain type of future. Sometimes they're really young, first time founders, Mark Zuckerberg, Bill Gates, Paul Allen, you know, we just gave the example of Mark Andreessen. In that case, usually they're at the cutting edge of a new technology. And they have a beginner's mind.

• 49:47Speaker 01

  And they aren't even encumbered by the old way of looking things. It's like, the entire world lives in Cartesian coordinates and they discover polar coordinates. And they don't even have to translate between the two because they never understood Cartesian coordinates. And so in that case, their knowledge about the future is more valuable to success than their knowledge as business people. But in the case of like Applied Intuition, if you're selling very large contracts, enterprise customers, they need to believe that you can do the job. If you're Okta and you're doing identity management for cloud customers, they're going to trust Todd McKinnon from Salesforce way before they're going to trust a college dropout to do that job.

• 50:29Speaker 01

  And so I like to say founder future fit is, you know, who knows the most about this future? Who has the most intrinsic motivation to pursue it? Who has the best network and keep the best company in that ecosystem of the future? You know, those are the types of things that, you know, founders that, that show up differently on those dimensions usually do better. Because they're more likely to understand what to build in the first place. And they're more likely to convince early believers to believe in their ideas in the first place.

• 51:04Lenny Rachitsky?

  So it's not that these people have some vision of the future that is more accurate or more incredible than everyone else. It's that their background and even the way they look matches the problem that they're going after. So in this applied intuition case, you're saying like the founders look like people that a CEO of GM would be like, I trust these people to build this thing for me.

• 51:25Speaker 01

  Yeah, I like to, you know, Louis Pasteur once said, "Chance favors the prepared mind." And, and when I started working on this book, for the first time, I really understood what he meant, right? Like, "Chance favors the prepared mind because a prepared mind attracts luck. A prepared mind is better positioned to notice a breakthrough than other minds." And a prepared mind sees the breakthrough, sees around the corner, because they're thinking about the subject all the time. And so like, most people think that the way you come up with good startup ideas is try to think of a startup. And I like to say, no, that's

• 52:05Speaker 01

  exactly wrong. What you do to come up with great startup ideas is you live in the future, and you notice what's missing in the future. And it's like, it's, it's, it's axiomatic. If you're living in the future, there will be unbuilt, missing things. Because if it was all built, you'd be living in the present. And so if you're, if you're living in the future, and you notice what's missing, your intuition about what to build is far more likely to be right. So like, um, you know, Andreessen didn't do the Mosaic browser because he thought there was a market for browsers, or that he didn't even know about a digital highway. He was trying to make the internet immediately more useful for him and his team. And his intuition about what to build was very good, because he was building the thing

• 52:50Speaker 01

  he wanted that was missing in the world. You know, in the case of Okta, they knew all the early Salesforce customers, but the, but the principle still applies, right? Those customers weren't equal. You know, they were linehouse customers. It's kind of like when I was at Silicon Graphics, I didn't spend time with normal movie studios. I spent time with Industrial Light and Magic, because I thought, if we solve their problem, they're going to take us to the promised land, right? All the stuff we build for Industrial Light and Magic will be the stuff that everybody wants someday. And so, like, not all customers are equal. You want to find customers that live in the future.

• 53:23Lenny Rachitsky?

  I love this point. Justin TV is another great example of this where he just assumed the future, everyone's going to be watching each other's reality shows. So he built his own backpack with a camera and a site just to stream himself.

• 53:34Speaker 01

  Yeah, and the Justin TV example is a great one, too, because, right, in Justin TV, he built the thing that he wished he had, even though it was a terrible idea, but it embodied attributes, it embodied these inflections of these insights that led them ultimately to Twitch. Ironically, Justin's second company, Atrium, most people thought that that made sense, automating legal tasks and, you know, Justin's a great founder, but Justin just didn't like the legal field. He had no passion for it. When he started Atrium, his passion was to be a higher status founder. And, you know, I've got a podcast with him recently where he talks about this, where he's like, "I wanted to be as big as Patrick Collison

• 54:17Speaker 01

  and Brian Chesky and Drew Houston," but it turns out that's not a very good reason to start a company, right? Like, founder future fit is ultimately about authenticity, and it's about who is the most authentically matched for that different radical future. And that, whoever that team is, has a really big head start in getting product market fit. And, you know, product market fit is the game, right? Whoever gets it first wins.

• 54:43Lenny Rachitsky?

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• 55:28Lenny Rachitsky?

  Okay, so there's inflections, there's insights, there's future founder fit. To make this super real for say, a product manager sitting at a company right now, I want to start a startup. Or someone just starting to ideate on ideas. What are some things that you recommend they start to do? This week, next month, to start to find a big idea, or to start an idea? It doesn't have to be a big idea, an idea that'll take them somewhere.

• 55:52Speaker 01

  The number one thing I like to say is get out of the present. And so like what, what, you know, people talk about getting out of the building and of course we should. But getting out of the present is a little bit more subtle than that, right? So William Gibson was right, you know, when he said, um, the future is already here. It's just not evenly distributed. So most great startup ideas come from a future that exists right now, today. And so when I like to say to people, and this is a question that I always ask when I'm pitched. Is this from the future? And, you know, and then some people will say to me like, hey, I have a mental health startup. Mental health is a huge problem. It needs to be solved.

• 56:37Speaker 01

  And I'll say, why is your idea from the future? Well, in the future, I believe mental health needs to be solved. I'm like, that's not what I'm asking. I'm asking, what part of the future have you been living in? That gives you the right to have an opinion about the future. So I like to say, if you're not living in the future, you don't, your opinion about it isn't valid. It's kind of like saying, I think a customer will do X and you've never talked to a customer. I'm like, okay, your opinion's interesting, but irrelevant. And so the only relevant future, the only relevant opinions about the future. Come from people who are living in it. And coming from people who understand what's new about it in a very visceral way. And, and you know, there are people who do a good job of this, right?

• 57:20Speaker 01

  Like Maddie Hall, who started Living Carbit, she was working at Zenefit. And at first she tried to think of a startup and she had ideas that weren't that good. She had a laser tag idea and a few other things. But then she decided to go follow Sam Altman for a year and be his chief of staff. And Sam Altman visits the future multiple times a day with people. And so that's what led her to this idea that for living carbon, which does genetically modified trees. But I mean, couldn't be farther away from Zenith. Right. But, but like she saw Microsoft was about to spend a lot of money, a bunch of other companies about to spend a lot of money on carbon takeout. She saw that the, the, the genetic engineering technology was getting good enough that you could engineer these trees.

• 58:04Speaker 01

  She married the inflections with the need and then off she went. But she was, you know, basically sampling a lot of different futures until she found one that she liked.

• 58:15Lenny Rachitsky?

  I love that example because it makes it very real what living in the future looks like. So one is spend time with people that are very far along on some edge of technology or the way people behave. Another you shared is a work with a company like say, uh, that you worked with at Silicon Graphics.

• 58:32Speaker 01

  Yep.

• 58:32Lenny Rachitsky?

  Industry related magic.

• 58:33Speaker 01

  Magic.

• 58:34Lenny Rachitsky?

  Yeah.

• 58:35Speaker 01

  Yeah. So McCracken had a term for it, uh, that I've always liked, uh, lighthouse customers. And so like a lighthouse has this light that shines out and, and unobscures the fog. And not all customers are equal. And some customers are living in the future and those customers are gold. And those customers will, if you solve their needs, take you to the promised land. And so like, so yeah, you can, you can, you can build what's missing for yourself, like Andreessen did, or Zuckerberg, or Steve Wozniak, or Bill Gates. Or you can build something for lighthouse customers you have a good relationship with. Or if you can do neither of those things, the number one question I get asked is, hey, that's great.

• 59:18Speaker 01

  If you live in a supercomputer lab or if you, you know, uh, were selling a dust lighter magic or like all the sales force. Cause I'm not one of those. I'm a second year student at Stanford Business School. I'm a product manager at company X. I'm, you know, whatever the case may be. That's where the Matty Hall example is really powerful because Matty proactively got out of the present in a very intentional way. Uh, so I love her example, uh, as a case study.

• 59:47Lenny Rachitsky?

  What signs tell you that a company is one of these lighthouse companies living in the future, or person is, is just like you just feel it like they're so far ahead of everyone else?

• 59:55Speaker 01

  Usually it has to do with how tech forward they are. You know, there was, there was a time when a lot of people didn't think the cloud was going to be a thing because it was insecure and I'm not going to host my important data and let somebody else have it. But there were a set of customers who were really excited about the cloud and they tended to adopt certain kinds of products. When I used to work in client server startups, you knew that the early adopters were people who were using like relational database servers and scalable front end programming interfaces and things like that, you know, were trying to have distributed apps that they would roll out, you know, you could, you could tell who was trying to play offense with the new trends.

• 1:00:38Lenny Rachitsky?

  Awesome. Okay, before we move on into actions, is there anything else you think might be useful to share in terms of helping people come up with an idea, find a great idea?

• 1:00:48Speaker 01

  The number one thing about the ideas goes back to the not playing the comparison game. So the, the thing that I see people underestimate when they come up with ideas is the threshold of desperation required in the customer, right? So like, like, um, if we want to solve problems for desperate people and, and it's like, if we have powerful inflections that really empower and we have something unique, there should be somebody who is irresistibly drawn to that empowerment. They should say, oh my God, this is incredible. This is a game changer. I can't unsee that. Why is that important?

• 1:01:30Speaker 01

  I like to say that if a customer has the ability to do something other than what you do to solve their problem, they won't be crazy enough to do business with a startup. Right? So customer has to be so desperate that when they see what you have, they're like, I've gotta have it. And, and so I like to say, you want to force a choice and not a comparison. If everybody's selling apples, I can't be a 10 times better apple. I want to be the world's first banana. And I, I want to say to people, you may not want bananas. You may not like them. You not, may not value the advantage of bananas. But if you value banana-ness, I'm the only person that's got it. And it's like, you know, come to pop up.

• 1:02:11Speaker 01

  Right? And so that's like, an insight feels like that. Uh, and, and in the early days, don't spend any of your time with people who love apples because they're not, you're not going to convince them. And they're going to waste your time. What you want to do is find everybody in the world who values the advantages of bananas. As soon as possible, not wasting any time on the people who don't. And so that I'd, I'd say that that kind of wrap, wraps up the idea of insights. Is it like, we want to force a choice and not a comparison? You know, nobody looks at the Tesla Cybertruck and says, oh yeah, well, how does that compare to Ford F-150? And you may hate the Cybertruck. You may think it's stupid, but nobody is neutral about the Cybertruck. Right? That's, that's, you want to have a product that people can't be neutral about.

• 1:02:56Speaker 01

  But that the people who have magnetized positively to it, just can't imagine a world without.

• 1:03:03Lenny Rachitsky?

  I love that. And going back to your banana example, you want just a few people to be just like, I need that banana, no matter how much you're charging.

• 1:03:10Speaker 01

  That's right. And, and you know, even if it's halfway ripe, even, you know, it's like, you know, because that's the other thing, right? They, they need to be willing to tolerate the fact that you can't execute very well because like, how could a startup execute really well? They have no resources. And so like, the only chance for a startup to win is to win on a playing field where better doesn't matter. Where execution isn't as important as gotta have that thing. I'll take any version of it you give me. Because I am desperate for it.

• 1:03:42Lenny Rachitsky?

  Speaking of execution, good segue to the second part of the chat, which is basically you looked into what do the most successful companies and founders do differently? And you also found three core things that they all do, and many of them do. Movements, storytelling, disagreeableness. Let's talk about each one. Pick whichever one you want to start with.

• 1:04:04Speaker 01

  Yeah, so, so, you know, we've talked about thinking different. But it's like, the problem, though, is that, you know, asking people to abandon the familiar for an uncertain tomorrow is a provocative act. All startups are fundamentally disagreeable. There are disagreement with how things are done. There are disagreement with the pattern of what is. And so, we need, as founders, to persuade others to change their habits with our pattern-breaking actions. And so, what the, what the pattern-breaking founder does is they create a stark dichotomy between the world that is and the world that could be. And they create an irresistible desire on the part of early believers to move to that

• 1:04:48Speaker 01

  different future with them. And so, you know, I like to say there are three aspects to acting different, right? One is movements, the other storytelling, and the other is disagreeableness. And so, like, the movement piece is, is the front and centerpiece because, like, most people, when they think of movements, they think of it as more like social movements, like civil rights movement and Martin Luther King. Or they think of, you know, there's artistic movements like cubism and Picasso. But like fundamentally, a movement is a different way of developing a market than how most marketing people think about developing market. Most people, when they think about marketing, they think, okay, I've got a set of targets, I've got a set of programs, I've got inbound and outbound, I've got, you know, these things I need to do.

• 1:05:33Speaker 01

  What a movement does is it, it leverages a grievance of a minority against the tyranny of a majority. And it takes that and animates it in a way that those early believers are emotionally committed to moving. So like, early customers are not animated by pragmatism. They're animated by belief. Early, early customers, early employees, early investors.

• 1:06:03Speaker 01

  Don't decide to go into business with you because of the practical reasons that you unlock. They do it for aesthetic reasons. They do it because they believe what you believe. And so a movement is basically a set of people with the same belief moving together to a different future. And when you think about it, it's this equally the same, right? For the civil rights movement. And a movement is a way to crystallize the choice. Like if you're, if you believe in civil rights, you can't be half in on that. You either believe that that it should be about the content of people's character, not their skin color. You can't be sort of not racist, right? You either believe or you don't believe.

• 1:06:45Speaker 01

  And, you know, the people who who followed Martin Luther King bought into the aesthetically better future that his movement promised. And it turns out, and I don't mean to equate, that was a pretty important movement, right? It's like some movements are more frivolous, you know, like say an artistic movement. But the notion is similar in that there's a set of early believers who believe they've been enlightened about something that the rest of the world doesn't get yet. And they think that the startup founder is is sort of like the prime mover of that movement. And then what happens is that startup markets happen because the movements accumulate and accelerate and more and more people join them.

• 1:07:28Speaker 01

  And what was once heresy becomes the accepted conventional wisdom. And now the company is no longer a startup, it's a company. And now all of a sudden it is a valid market and all of a sudden they're the status quo and they got to watch out for the next set of disruptors. So the movement is the first key thing, I think, in all of this.

• 1:07:45Lenny Rachitsky?

  Is there an example? Lyft obviously comes to mind with this, the pink mustaches, just this is the future.

• 1:07:50Speaker 01

  Yeah, ride sharing, ride sharing was a movement. You know, in in my early days, starting Floodgate with Ann, we thought that seed investing was a movement. And so we thought that there was going to be a day where seed funds would be a permanent feature of the venture landscape. But people didn't believe that in the late 2000s. And so we're like, not enough that we just. Succeed and invest in good companies. We need to get the best LPs in the world to buy into this, right? We need to get Phil Horsley at Horsley Bridge and Dave Swenson at Yale and people who, you know, are respected in the ecosystem to say, yeah, I, I buy into that. And so it was really important to us to get the right early believers in our movement.

• 1:08:34Speaker 01

  You know, Judith Elsie at Weather Gage, who had just started a, a new firm. Uh, one, one of my favorite examples is actually an old one, Clarence Birdseye. So, you know, you go into the supermarket and there's frozen food aisle. Well, Clarence Birdseye discovered how to flash freeze food when he was up in the Arctic looking at Eskimos. And they were flash freezing their fish and he wondered, could you do it for other things? And he found out you could fruit and vegetables. But like, it wasn't enough to just flash freeze the fish or the fruits or the vegetables. You had to convince the trains to have a, a refrigerated car. You had to convince the supermarket to have a refrigerated aisle. And so he had to start a movement where a whole lot of people simultaneously believed in this idea of being able to

• 1:09:19Speaker 01

  eat food in a more convenient way, not always in season, not always, uh, grown locally from where you were. And so all movements have that characteristic where you're, you know, you kind of start with a higher purpose. And then you move people to that different future.

• 1:09:35Lenny Rachitsky?

  I'm trying to think about what are current movements that are happening. One that might be a movement is with L L M's, just this bet that transformers are the future of how this is going to work, that just more compute is the answer versus trying to find something else. Does that sound right?

• 1:09:50Speaker 01

  Another one that I really like is Tesla. So like Tesla's mission says accelerate the world's transition to sustainable energy. They don't even say they're a car company. Right? So like Tesla doesn't say, here's why we're better than Ford and Toyota. And, and this is really important, right? Because the great movements do appeal to a higher purpose. Uh, they don't say, I'm better, I'm better than company X. You know, I'm Avis, I try harder than her. They appeal to a more aesthetically higher purpose future. And then they show that this startup is the vehicle for that movement to be actualized. Which is kind of a good segue to storytelling.

• 1:10:31Lenny Rachitsky?

  Uh, one other quick example, I'm thinking about linear is kind of pushing this movement of craft and design and experience matters in B2B software. And you shouldn't settle for something that you don't love.

• 1:10:41Speaker 01

  Very much so. And you know what? Chesky, this was, I don't think he even knew he was fully doing this at the time. But Chesky did this brilliantly with Airbnb. So he created a movement around living like a local. And so the, the other thing that a movement does is it turns the greatest strength of the status quo into its biggest weakness. And so like Brian never said hotels suck, you know, death to the four seasons. He just said, hey, look, you know, when you go to Paris, you have a choice. You can, you can hang out in the four seasons and it's gonna be just like the four seasons everywhere else in the world. It'll be in the middle of the town. Or you can live in Paris like a Parisian. And, and he's like, I don't have to say that the four seasons is bad for you to decide to choose me.

• 1:11:26Speaker 01

  And oh, by the way, if you want to stay in the same kind of hotel everywhere you go, I'm not for you. But so like now, let's say you're four seasons. Your whole business is predicated on doing a good job of having a common experience that people could accept and that they're used to, that they expect. And so now you've, you've taken all of the stuff that you invested decades in. And turned it into something you have to apologize for all of a sudden. And so, so like the, the great startups, they create movements, not so much by criticizing the incumbent. But by um, showing the weakness in the strength of the income. And then just saying to the customer, hey, look, you decide. It's not up to me to decide what's bad about four seasons. It's up to you to decide whether you value my difference or not.

• 1:12:10Lenny Rachitsky?

  That reminds me of counter positioning from Hamilton, Hamilton, Helmer's seven powers book.

• 1:12:15Speaker 01

  Hundred percent.

• 1:12:17Lenny Rachitsky?

  So to make it even more practical for people that are like, oh, I need to come up with a movement for my startup. That's why things aren't working. It sounds like it's kind of a, here's how we want the future to look and why we're doing this. And then it's a combination of marketing, positioning, messaging, repeating it, social media, I imagine. Is that, is that roughly how to think about?

• 1:12:35Speaker 01

  Oh, but, but I, but I would also say that uh, it's about storytelling. And so like storytelling, uh. There is a science to storytelling. And so like, for example, you know, the hero's journey. You have somebody in the world that is the hero. Uh, let's say Luke Skywalker on Tatooine, dusty planet. He's bored out of his mind. And then a mentor shows up. And offers them a call to adventure. Obi-Wan Kenobi. And at first they resist the call. But then something bad happens, you know, in this case, Luke's like, hey, I can't, I can't come with you. I got chores to do for Aunt Beru and Uncle Owen. But then he comes back to his place and it's all burned down. The stormtroopers killed his aunt and uncle.

• 1:13:21Speaker 01

  So then he accepts the call. The mentor has a tool and a magic. In this case, it was a lightsaber was the tool or the magic was the force. And, and they need those things because the hero has to have a reason to credibly believe. That they can beat the bad guy. Right? And so then they, then what happens is you, you, you. Find co-conspirators along the way, Han Solo, Chewie. You know, ultimately the princess, you, you rescue her. You blow up the Death Star, you beat the Empire. And then emerge transformed. They even get medals at the end of the movie, right? Now it turns out that the exact same thing applies for startups. So like. If we take the Lyft example. Let's just say I'm a rider.

• 1:14:07Speaker 01

  In the past, the world that is taxi suckens.

• 1:14:11Speaker 01

  I can't even get one. And when I get one, it's gross and it smells bad and it's late and it. They won't take my credit cards. I have to have cash. They can't rely on them to get me there. I guess my alternative is to park. You can't ever get parking. People break into your car. That's the world that is. Logan and John would call, engage in a call to adventure. Try this ride sharing app. It's, it shows cars on a map. You know where they are all the time. They come within five minutes. Uh, fist bump the driver. Now, this was where the genius of the pink mustache came in. So the pink mustache honored the fact. That a lot of times people resist the call. It's scary to get in a stranger's car. So the pink mustache made it seem a little bit less scary. When you see these cars drive around in San Francisco,

• 1:14:56Speaker 01

  you're like, hmm, what's up with that pink mustache? And you're talking to your friend. They say, oh, it's this new thing called Lyft. It's pretty cool. You know, it's an app. Have you seen it? And so Logan and John did among the best I've ever seen at honoring the fact that people might resist the call. But then part of the story is languaging. This was the genius of Twitter. They didn't call it micro blogs, Inc., right? They they created a metaphor around tweeting birds, you know? The the Tesla was this way, right? It wouldn't have survived a comparison with a Porsche of nine eleven. The seats weren't as good. The radio wasn't as good. But but Elon was telling a story about a different future. And when you bought the Tesla Roadster, you weren't buying it for practical reasons. You were buying it for aesthetic reasons. You were buying it

• 1:15:41Speaker 01

  because you thought that that future was something you wanted to be part of. So the storytelling primitive ends up working spectacularly well for startups, right? We need to describe the world it is. We need to describe the world it could be, which is that different future. We need to understand, and this is important, right, that your job as the founder is to be Obi-Wan, not Luke. So the founders sometimes make the mistake of thinking that they're the hero, but they're not. The early believers are the heroes. And it's the job of the founder to tell a story that emotes early believers to want to move with them and co-create the future with them. And like the story you tell an employee is different from the story you tell an investor is different from the story you tell a customer.

• 1:16:27Speaker 01

  Because all of them have a different idea of what their heroes jerk, you know? If you're an investor, maybe your idea of being a hero is to make a hundred times your money and be on some fancy list. Uh, and make money for your LPs. If you're a early customer, maybe you're a hero by solving an important business problem and getting recognized for it in your company. Uh, if you're an early employee, maybe it's you want to work on something you're excited about with really awesome people that don't waste your time with politics and bureaucracy, right? All of those are different journeys. All of those are different transformational ways to self-actualize. And we have to we have to meet those people where they are and and give them a reason to want to come with us to the world it could be.

• 1:17:10Lenny Rachitsky?

  I had Nancy Duarte on the podcast. She is one of the most famous presentation designers and she had exactly the same advice when you're trying to tell a story. You basically bounce back between the world that is, the world that could be, what is, what could be, what is, what could be, and just kind of keep going back and forth.

• 1:17:25Speaker 01

  Hundred percent. In fact, Nancy is the person who helped me understand this better than any single person. And so Nancy would show me how Steve Jobs' iPhone Watch speech. She'd be like, okay, well, now notice what he does. He shows how bad phones suck now. They have styluses, they have keyboards. And then he talks about what could be. You could combine an internet communicator. You could combine an iPod. And he goes back and forth between how bad the current state of things is, how it should be, how bad it is, how it should be. Introducing the iPhone, how bad it was, how awesome it's gonna be, how awesome it is.

• 1:18:07Speaker 01

  Like, when you look at his speech, he's masterful at toggling. And by the way, the same is true of Abe Lincoln with the Gettysburg Address. War score in seven years ago, new nation, now we're in a civil war. You know, we need to preserve what we stand for as a country. We need to go win this war. But he kind of goes back and forth. Drawing a tension between what has happened in the world that was and the world that could be.

• 1:18:33Lenny Rachitsky?

  Something that I was thinking as you were talking was, I've seen too many founders spend so much time crafting this amazing story and vision of their product. And they have this really cool blog post and big idea, but nobody really cares about their product yet. Do you have any advice of just like, just make sure you're building something people want above all else and the story is a layer on top of that?

• 1:18:55Speaker 01

  So many startups I see, the first slide is like, we're Acme AI Software, we're located in San Francisco. We're funded by X and Y VCs. That's not storytelling, because you're talking about yourself. Right? Like, and if you're trying to make the person in the audience the hero, they don't care about you yet. They care about how you're gonna make them a hero. And so like, when you, when you kind of say, okay.

• 1:19:25Speaker 01

  If I'm pitching VCs, what I really need to do is help them understand why they'll be a hero. If they invest in my company, according to what makes them feel heroic. What you present is different, but like what, what a lot of startup presentations do is they take their sales pitch and they re-host it for every other audience. They re-host it for the press, for investors and for employees and all that. And, and that's wrong because what you're doing is you're talking about yourself to different people. But what you want to do is describe the world that could be, the stakes that are involved. And then each of those individual audiences, you want to meet them where they live in the world that is. And show them how they can engage in a transformational journey to the world it could be.

• 1:20:12Lenny Rachitsky?

  And also show your amazing stats and backgrounds and market size and all that stuff.

• 1:20:19Speaker 01

  Yeah, although it's, it's funny, you know, I've found that investors are the same investors. Ultimately, they believe or they don't believe. You know, a lot of times, this is the other thing I see happen is the, the poor founder will get advice from 20 different people about their pitch deck. And a lot of the people giving them advice are not believers in that different future. They're giving generic startup advice or they'll, they'll go pitch a bunch of firms. And they didn't, they didn't consider who's prepared to possibly believe who isn't. And so then they, then they get objections to their pitch from people who aren't going to believe anyway. And then they try to have a slide to meet that objection. And before you know it, you have what I call a Franken deck.

• 1:20:59Speaker 01

  And so you have this huge gigantic presentation, trying to anticipate every objection. And, and the person who was ready to believe you in the first place, doesn't know what you were trying to say because you obscured it with all this other stuff. And so I find that just like with an insight, it's okay if most investors don't like your idea. What you want to find is the ones who are prepared to move with you and make sure they absolutely know why they should. That's, to me, that's the ideal pitch deck.

• 1:21:28Lenny Rachitsky?

  I love this advice. And just to be clear, this is like pre-seed and pre-seed before there's a lot of traction, a lot of data.

• 1:21:34Speaker 01

  Exactly, exactly.

• 1:21:36Lenny Rachitsky?

  So what's your advice to a founder that's trying to iterate on their, on their deck? Is it just like, don't show it to too many people? Is it stick to your guns?

• 1:21:43Speaker 01

  Okay, here, here'd be my succinct advice. And other than that, there's about a million details. Slide one. Slide one, you say what you do as if I literally know nothing. So it's not, we're Airbnb, we're a marketplace for unused residential housing space. Bad. But, but you'll get advice that says to do that because VCs think marketplaces are hot, residential real estate's big. What you should instead say is something like, we're Airbnb, we let you rent an extra room in your house. Because now as the VC, I'm like, oh, I know what you do. And, and there are a lot of pitches I'm 10, 15 minutes in, and I'm trying to understand what they do, but I don't know.

• 1:22:24Speaker 01

  So if like, you just say, here's what we do. And then the second thing that I say to people is, I think your second slide ought to be, here's the thing we know that's not obvious. So like when I was raising Fund One for Floodgate, I would go to an LP and say, we believe that there's a gap between angels and VCs. And VCs are writing $5 million checks, angels $250,000 check. We believe that 500,000 is the new 5 million because of lean startups. We believe that there will be a new type of category of funds called Z-funds. Now, if you don't believe that, nothing else I'm about to say is going to make any sense to you. You know, I can just give you your time back.

• 1:23:04Speaker 01

  Because like it's not, but then, once if they did believe that, or they were in a position to lean forward, now when they start mentioning my competitors, I say, okay, well, recall, Peter Fenton works at Benchmark, he's not going to compete with me because why would Peter Fenton leave Benchmark to start a seed fund? Doesn't make sense. The only people who are going to try to compete with me from the big funds are the people who aren't performing. But if you, if you set the context of what your insight is, you can always come back to it when they bring up competitors, you can always come back to it when they bring up objections. And you could say, hey, remember, like I'm just telling you. We need to agree on this insight for this to have a chance of being great some. So what do we do? What's our insight? And then slide three is,

• 1:23:49Speaker 01

  what if any proof points do we have? Do we have any customers? Do we have great founders? You know, is there something happened already? That should cause you to believe that my insight is valid.

• 1:24:01Lenny Rachitsky?

  I love this. I love this tangent. We went on. Let me come back to the actions that you found the most successful startups end up taking. We've talked about movements. We've talked about storytelling. The third is my favorite. I'm excited to hear you talk about it, which is disagreeableness. What is that about?

• 1:24:19Speaker 01

  Earlier, I mentioned that you want to escape the comparison trap when you have your insight and when you have your idea. In in creating movements and telling stories, you want to break free from the conformity trap. We always are under pressure to conform in this world. And, you know, people use the pressure of conformity to prevent us from exploring things outside of our limits. You know, like there's a, there's a book that I love called Jonathan Livingston Seagull, where there's this seagull who wants to fly at infinite speed. And all the other seagulls are like, look, we're just destined to eat crap off the surface of the ocean. That's just what we are. We're seagulls. And he ends up getting banished from the flock because everybody thinks he's crazy.

• 1:25:05Speaker 01

  And so to me, the great founders are kind of like Jonathan Livingston Seagull. They're willing to pursue something that they're obsessed with, that they think has to happen in this world. And they're willing to sacrifice their status, you know, in the socio economic, sometimes dominance hierarchy. Because fulfilling the mission is ultimately more important to them than fitting. And you know, you can't stand out if you always fit in, right? The only people who are different can really make a difference. And so that's kind of the mindset. So I like to say a startup is a fundamentally disagreeable act in the first place.

• 1:25:44Speaker 01

  And there's going to be times you need to be disagreeable. And I've, I've seen this time and again, you know, like I hear people say to me, I, I want to work with a founder who's coachable. I'm like, you know, I'm not really sure, you know, like it. Sometimes I used to joke that when I would meet with Ev Williams, my whole job was to give him advice that he ignored. So I would say to him, I'd say, hey, Ev, I don't think you should raise that much money because I think you'll spend whatever you raise in 18 months, no matter how much you raise. And he said, man, that's, so you mean that startups almost always spend their money in 18 months regardless of the amount? And I said, yeah, I call it Mike's law. It almost always happens. I said, because once you have the money, all the pressure is on you to spend it.

• 1:26:27Speaker 01

  And so, so he's like, man, you know, that is a really good advice. I'd never thought of it that way before. That sounds right to me. Well, he proceeds to go raise a shitload of money. But like, you know, he did stuff that I didn't think he should do, but it worked. And I liked that in him. Like a lot of people would say, well, doesn't it bother you that he didn't listen to you that much? No, because he was disagreeable, right? And he was the right kind of disagreeable. You know, he didn't say pound sand, I, you know, I'm not listening to you, la, la, la, I'm covering my ears. He listened and he understood what I thought the truth was. He just believed a different truth than I did. And, you know, that's fine. You know, uh, my job as the investor

• 1:27:10Speaker 01

  is to just help them see what my perception of the truth is, honestly, right? And if they decide to go in a different direction, that's great. They're the founder, they're the genius. And so I, I find that, and you know, all of them, not all of them, but a whole lot of them are more disagreeable than history lets on, you know, like my dad worked for Bill Gates when he was at Microsoft. Bill Gates is not a warm and fuzzy dude. He was, he was tough, right? He was a hard ass. But great people are inspired by hard asses as long as the hard ass like makes this, you know, you, you meld the steel in the heat of the flame of high standards.

• 1:27:52Speaker 01

  And, you know, people, sometimes people can't work for Elon Musk for very long, but almost everybody I know who's worked for him really respects him. Because he has high standards and, you know, he's not trying to win friends and influence people. He's trying to land on Mars. And if you're gonna land on Mars, you gotta be disagreeable some of the time. So, um, you know, I just find that that is a trait that is under, underappreciated in these great founders quite often.

• 1:28:18Lenny Rachitsky?

  Which you just shared reminds me of a, a recent podcast episode of Jeffrey Pfeffer, which I know you listen to. Where he talks about the rules of power, how people acquire power. And the last rule is, understand that once you have acquired power, what you did to get it will be forgiven, forgotten, or both. And so your Bill Gates example, I think is a good one where people look at him as such a nice dude, when as you said, he was not so nice.

• 1:28:41Speaker 01

  Well, here's the other thing. And by the way, I listened to that episode from beginning to the end, right? And I thought it was fantastic because I was like, the, the next thing I want to do is go to Professor Pfeffer and say, can we cast these seven principles through a pattern breaking lens? Like, let's assume you're a startup capitalist. You're not at a company. Because, you know, changing the future requires you to acquire a different form of power. Then, you know, you would say in an organization, but as I was listening to it, I was like, these principles all apply to pattern breakers. And, and, you know, like all of them, every single one. And, and the other one, right, is that, I think that he said, you know, not everybody's gonna like you.

• 1:29:26Speaker 01

  And, you know, if you, you want to be liked, get a dog. But if you want, if you want power, there's certain things you're gonna have to do and reconcile yourself with. And so acquisition of power, you know, acquisition of power has this notion of you gotta, you gotta wield the carrot and the stick. Uh, if all you do is wield the carrot, you won't create enough activation energy for people to move to that different future. Sometimes you do have to use the stick. And sometimes you have to realize that people are gonna use. Your desire to fit in against you. They're gonna say, oh, you can't do that. That's illegal. Or you can't do that. That's unethical. Or you can't do that. You're being some tech bro bad guy. Who's like, you know, a lot of what I find with the founders I work with.

• 1:30:12Speaker 01

  Ironically, before they win, they have to have the courage to be disliked because people don't like their idea. They think it's stupid, lonely, but then after they win, it's even worse. Because everybody says you cheated, or you're a bad guy, or you broke the rules, or you're too powerful, or who gave you the right to decide what the future should be? And so they just, they get criticized unfairly in the other direction after they succeed. But in the end, that's what it comes with the territory, right? It's kind of, you know, part of the job description, unfortunately.

• 1:30:43Lenny Rachitsky?

  Yeah, Elon goes through a lot of that. Something, something I saw you tweet recently along these same lines is that most successful companies, there's tons of chaos internally. And everyone's working at these companies like this is a place that mess. How is this even working? But your, your finding is that that's very common and normal.

• 1:30:59Speaker 01

  Yeah, especially in startups. So there have been times when I've said things like execution doesn't matter. And, and people can misinterpret that, you know, so when I mean execution doesn't matter, I don't mean people shouldn't get things done. Or people shouldn't say, what did you do this week? But when I think of execution in a corporate sense, like corporations in theory should always win. They have big management team. They have more experienced people. They have customer suppliers, partners, brand. So startup never beats a big company by executing better than the big company. Startup wins over the big company because it proposes a radically different future, disorients the incumbent.

• 1:31:42Speaker 01

  And sort of chaotically moves people to that different future. But, but like every startup I've ever seen on the inside was wowed. You know, it was like a capitalist mutation. It was like, it was like trying to find a beaked finch in the Galapagos Islands. That's never been discovered before. And it's all ambiguous all the time and people are arguing about what the right direction is all the time. And people are, you know, it's just messy, but it's like, you know, movements are messy. And, and that's just kind of, you know, that's kind of what comes with the territory. Like friend, friend of mine, Robin Roberts once said, you know, make your mess your message. It's so true.

• 1:32:24Lenny Rachitsky?

  Oh, man, that's so funny. I love it. I have a couple more questions before we wrap up. Before we leave the actions category, is there anything else you think is important to share? Any other lessons that we haven't touched on?

• 1:32:37Speaker 01

  I think Lenny, you, I don't know if you've consciously tried to do this or not, but on some level, you've created a movement, right? And like you have, um, no one has ever engaged people with product management sensibilities the way you have. And, you know, like I go to your site, right? And you even have merch, right? For product manager. I'm like, what? And, you know, I imagine the early posts that you wrote, it probably felt kind of lonely. It's probably like, I wonder if anybody's even reading this stuff. But it's like, it starts to accumulate, right? More people start to read it. More people start to tell their friends about it. And now all of a sudden, it kind of becomes a thing, right? And so, uh, you know, in many ways, Lenny's podcast, Lenny's blog and Lenny's newsletter are all,

• 1:33:20Speaker 01

  you know, kind of examples of facets of this movement that you're creating. But, but your, your movement is not just about the stories you tell or the guests you have, or the podcasts, or the write-ups you have. You have a point of view, right? You have a point of view about the centrality of a product manager in companies and in businesses and in the future. And it's like honoring that the way Nike honors athletes. Uh, and it's like that, the, the point of view is the movement, just like the point of view is the company when it's a startup. At this point of view is the story. It's the, it's the place that people want to go that got animated by the beliefs that you shared.

• 1:34:06Lenny Rachitsky?

  Fascinating and flattered. I have no intention of starting a movement. Uh, I could see what you're saying. That sounds like a lot of stress.

• 1:34:13Speaker 01

  I think you already have, whether, whether you met to or not, I think you have.

• 1:34:17Lenny Rachitsky?

  All right. Well, I do have swag and if you're on YouTube, this is our best selling item, a hat that just says product manager. People love it. I have it in the background.

• 1:34:24Speaker 01

  Do I get to, can I wear one if I'm still not one?

• 1:34:28Lenny Rachitsky?

  Absolutely. You've, you've been one and so forever product manager.

• 1:34:31Speaker 01

  And hopefully I get grandfathered in for my past.

• 1:34:35Lenny Rachitsky?

  Forever, forever PM Mike. Okay. I just have one more question. And this is around your last chapter, which I think is going to be useful to a lot of people. Your last chapter is about how to apply a lot of these principles to working at a company. Say you're not a founder, a lot of these principles still apply. What advice can you share for people, say a PM, instead of a large company, to help them find pattern breaking ideas, big ideas within the company?

• 1:34:57Speaker 01

  Yeah. So the first, the first thing I think is important to understand is that

• 1:35:04Speaker 01

  everything about a value delivery system, when you're doing a pattern breaking idea is different from a normal idea. So like the mistake that most companies make is they say, I've got this new pattern breaking idea. It needs to be a third of my business in 24 months or three years or whatever. Bad strategy, right? So like,

• 1:35:25Speaker 01

  let's take a company like, say, Apple, when they did the iPhone. The iPhone was a whole new thing. It was driven by, in this case, Steve Jobs, the founder. You couldn't reconcile it with the original business of the Mac and not really even the iPod. So you had to, you had to treat it as a totally different thing. And, and that's really hard for companies. Like, so companies make the mistake of engaging in a pattern breaking product, but they make it too visible. Or it's a career, career limiting move if it fails. And, you know, pattern breaking products have different types of leadership, different types of go to market motion, as we've described,

• 1:36:06Speaker 01

  different types of ideas, different risk profiles, you know, so you're, instead of saying,

• 1:36:13Speaker 01

  This company or this business is too big to fail. I need to make small bets that can fail a lot. The same is true with mergers and acquisitions, right? So if I buy a company, I need to ask, am I buying a pattern breaking company? To break the pattern of my business and go in a radically new direction? Or am I buying a company that's an extension of my current business? Neither is wrong per se, but the way you think about risk varies enormously. And so, so like some examples that I have in the book of good examples are the iPhone, Steve Jobs, AWS. But some people objected, they said, okay, that's easy for the founders to do because they're founders of the company.

• 1:36:56Speaker 01

  And that's Steve Jobs at Jeff Bezos. So the other example I like is Skunk World with Lockheed. And so when they, when they created a fighter plane in a very short amount of time. And that's how they did it. They, they had an organization totally separate from the main organization. Somebody with absolute power and, and tried to make it not visible. Tried to make it be separate. Because when you make it visible, you start to drift it back into the tractor beam of acting like a pattern matching corporation. You know, another good example back in the day was Don Estridge at IBM when they did the IBM PC. But it's almost always an autonomous business headed by a maverick.

• 1:37:38Speaker 01

  And you're, you're trying to do something discreetly different rather than a better version of what you've already done.

• 1:37:45Lenny Rachitsky?

  This aligns very well with, we had two recent podcast episodes. Talking to PMs at companies that are doing zero to one stuff. Mahika and Tongi. And Tongi had a really interesting tidbit along the lines you just talked about where he set up his team in a totally different time zone so that people that wanted to bug them just were like sleeping during that time. And they weren't even online so that they could just focus on the work they were doing and it worked out.

• 1:38:08Speaker 01

  I'm mostly through that episode and everything that I've listened to so far, I'm like, okay, that totally, that totally jibes with what I've seen. Uh, you know, the other person has an interesting take on this is Vinod Khok. And so Vinod basically thinks that what companies should do is take some portion of their profits. And let's say 10% of your profits and invest it in projects likely to fail. But with wildly asymmetric upside if they succeed. And then make them not visible to the mothership in the early inning. And so, you know, you wanna, you wanna, it's your willingness to fail that lets you have breakthrough success. And you know, any coin that says can't lose bad.

• 1:38:52Speaker 01

  On one side of it, might as well say can't win big on the other side. And so you have to, you know, it's your willingness to fail. And it comes back to departing from the consensus. Right? It's your willingness to fail that enables success. And every time you depart from the consensus, there's a chance you'll be wrong. You'll underperform the consensus. But it's your willingness to do that that lets you outperform it. But there's no shortcuts, right? The coin that says can't lose says can't win on the other side and lose big says win big on the other.

• 1:39:26Lenny Rachitsky?

  Mike, this episode is so full of nuggets, tactical advice, amazing stories. Everything I was hoping would be. Before we get to a very exciting lightning round, is there anything else that you think might be useful to share with folks that are trying to start a company? Or already along with a company?

• 1:39:44Speaker 01

  Yeah, the one thing I would say is that.

• 1:39:48Speaker 01

  It's a lonely existence. And it's okay if most people don't like your idea. And it doesn't mean you're right. But sure as heck doesn't mean you're wrong either. And so, you know, there's not enough people in this world. Willing to stick their neck out. For things that they believe that they see before the rest of us. And so just for what it's worth, if anybody in your audience is one of those people. You have just my utmost respect and affection. And I hope that, you know. In those times when it's. Tempting to not believe. You know. It comes with a territory. Every great founder has faced. And, you know, it doesn't make you wrong.

• 1:40:33Lenny Rachitsky?

  Amazing. What an empowering, inspiring way to end it. Mike, with that, we've reached our very exciting lightning round.

• 1:40:42Speaker 01

  Okay, here we go.

• 1:40:44Lenny Rachitsky?

  Here we go. First question, what are two or three books that you've recommended most to other people?

• 1:40:50Speaker 01

  A book called The Five Regrets of the Dying, Top Five Regrets of the Dying by Bronnie Ware. She was a hospice nurse and she would talk to people in the last 90 days of their lives. And, you know, and she would find out the things that they'd wished that they had done in their lives that they hadn't. And I always thought that that was a good, that that was a good book because it reminds you about what's important. And it reminds you that it isn't going to last forever. Someday it'll be the last day. There's another book that, that I really like called Chase, Chance and Creativity by a guy named James Austin.

• 1:41:28Speaker 01

  And I think that it's a good book because it talks about how certain people tend to attract luck more than others. And that actually that luck is created. You do make luck. And so like I, I, I'm just fascinated by this idea of luck and how it can be, how it can be harnessed. So I'd say those two, I mean, there, there's a whole bunch of them. You know, I've always liked all of Clay Christensen's books. The other one that I kind of liked is, uh, that I read recently is by Robert Greene, The Laws of Human Nature. So I like that one a lot as well. And then Nancy Guarte's book, Resonate. We talked about Nancy earlier. I like that book a lot.

• 1:42:13Lenny Rachitsky?

  I'm buying that first one immediately. That sounds incredible. I need that book. Regrets of the Dying. I found it on Amazon as you were talking. I'm buying it. Good, good pick there. Okay. Next question. Is there a favorite recent movie or TV show that you've really enjoyed?

• 1:42:26Speaker 01

  So I really liked, uh, that, that the movie about Enzo Ferrari. And I just, I have this huge affinity for 1960s cars. And the way that they replicated these 1960s Ferraris, I just thought was magical. I thought to the guys that did the special effects and the, just the attention to detail, I thought was just extraordinary.

• 1:42:50Lenny Rachitsky?

  I have not seen it. Quick aside, as I was buying this book, your book was recommended on Amazon for me.

• 1:42:55Speaker 01

  Oh, good. Okay, here we go.

• 1:42:57Lenny Rachitsky?

  Good job, Amazon. I will point people to where to find it at the end of this series of questions. But next question, is there a favorite product that you have recently discovered that you really like?

• 1:43:08Speaker 01

  When I was young, I, before I got into computers, I had a job as a professional calligrapher. And so I really like using calligraphy pens. And not long ago, I sort of discovered the world, it had been a long time since I'd reconnected with that hobby. I discovered the world of vintage fountain pen. So my favorite product of recent times is a, this will go, everybody will be like, that sounds pretty esoteric. But it's a Montblanc 149 first generation celluloid pen. So it was like right after World War II, and it was the Germans kind of coming back saying, you know,

• 1:43:48Speaker 01

  we've still got it, you know, it was just, it was just a product for the ages, you know, it has a flexible nib. They don't, fountain pens don't work the way they used to. They used to make flexible nibs so that you could write the way scribes wrote like in the 1800s and stuff. But then people in the modern world break those nibs and they use ballpoint pens anyway. But like when I use these old flexible 19, from pens from 1900 to the 1940s, they're just magical. I mean, they're just nothing like, there's, nobody's ever been able to equal that experience in modern times.

• 1:44:25Lenny Rachitsky?

  Wow, I gotta give me, I gotta try one of these pens.

• 1:44:27Speaker 01

  Yeah, I'll, I'll, I'll give you one of them so you can at least get a, get a feel for it. Yeah.

• 1:44:32Lenny Rachitsky?

  Wow, I'll give you a product management hat. I'll get a pen, a beautiful pen. I think I win in this exchange. Of Ethan? Two more questions. Do you have a favorite life motto that you often repeat to yourself, share with folks that you find useful to come back to?

• 1:44:47Speaker 01

  I learned it from my dad. It sounds simple, but it's kind of profound. Do your best. And what he, what he meant by that is he didn't mean be the best. He meant that life is a gift. You don't know how much time you're gonna have. Every day is the gift of your time. And the best way to honor the gift of your time is to do your best. And there be times you won't be the best, but if all you did was the best, that's all you could do. And I, and I remember one time, so I was a senior in high school. It, I've already gotten into Stanford. I'm totally psyched. I'm gonna go last week of the semester of senior year. And I'm have a test the next day in English.

• 1:45:28Speaker 01

  And my dad's like, hey, how are, how are you feeling about the test? I said, it doesn't really matter. I get to drop it. And I'm gonna get an A in the class because I've got, you know, I've got, I've got the goods, right? I don't, I don't need to do well on it. And he looked so disappointed at me. And, and he was like, you know, it doesn't sound like you're doing your best. And what he was kind of getting at was that, you know, the people who achieve greatness, they think everything counts.

• 1:45:58Speaker 01

  So I, I always uh, got a lot from that with him. And there, there'd be other times where I wouldn't do so well on something. And he would, he would say, well, you know, sometimes you make a careless mistake or, you know, but you did your best. That's all you could have done. And so like the, the idea of doing your best, I find to be very profound and it causes you to realize that the best way to show up in the world is to be the best, your best self. There's only one you in this world. And the more that you can show up as your best self, you'll be impossible to compete with. You won't feel the need to copy other folks. You won't need the, the, the need to compare yourself to other people. You'll compare yourself instead to the idea of perfection itself.

• 1:46:42Speaker 01

  And, and whatever that means in terms of your own ability to do your best. So I've always, to me, that's probably the most important life lesson I've learned. Wow. As you said, very simple, but very powerful. It's, it's powerful when you truly internalize it, right? When you, when you take it beyond an aphorism, it's very powerful.

• 1:47:03Lenny Rachitsky?

  It reminds me of your partner Anne Marie Coe's advice that she got from her dad, which is, I think, maybe the opposite that she shared on Tim Ferriss's podcast of just always do a world-class job at everything you do. You're doing a world-class job.

• 1:47:17Speaker 01

  Yep.

• 1:47:19Lenny Rachitsky?

  Amazing. Okay, I'm going to skip the last question just to end on that because that was way too beautiful to sully with another question. So just to give folks a chance to figure out where to buy your book, when it's available, how to find it, what they should know, do share.

• 1:47:35Speaker 01

  Yes, I guess there's two main ways, right? There's a, well, we've got a Substack. Not everybody's got to buy books, right? So there's patternbreakers.substack.com. And then I, you know, I have a site, patternbreakers.com, but you can also get the book on Amazon or, you know, anywhere. It's already available for preorder.

• 1:47:53Lenny Rachitsky?

  Amazing. And I usually ask people how listeners can be useful to you. I imagine it's check out the book, share what you've learned.

• 1:47:59Speaker 01

  My main goal is for the ideas to spread and to help people. And so, you know, hopefully, hopefully, it will have achieved that goal. But just anything that people can do to help spread the ideas and I'm looking, co-conspirators wanted.

• 1:48:15Lenny Rachitsky?

  I love these episodes where somebody like you spends hundreds of thousands of hours analyzing data and history and startups and talking to founders and just synthesizing all the things you've learned in a couple hours. I love this. Thank you, Mike, so much for being here and for sharing all this wisdom with us.

• 1:48:31Speaker 01

  Hey, well, thanks, Lenny. It's an honor to be on your show and, you know, it's been fun to see you do so well.

• 1:48:37Lenny Rachitsky?

  Thanks, Mike. It's an honor to have you on the show. And again, the book is called Pattern Breakers: Why Some Startups Change the Future. Mike, thank you so much for being here.

• 1:48:45Speaker 01

  Okay. See you, Lenny. Thanks.

• 1:48:47Lenny Rachitsky?

  Bye, everyone.

• 1:48:50Lenny Rachitsky?

  Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.