20 Product: Spotify's Gustav Söderström on Why Product is 100% Science and 0% Art, Why You Should Look at the Competition and then Do Something Completely Different & Why Talk is Cheap and Product Teams Should Do More of it; Structuring the Best Debate

Gustav Söderström is Spotify’s Chief Research & Development Officer. He has the CPO & CTO responsibility, overseeing the product, design, data, and engineering teams at Spotify and is responsible for Spotify’s product strategy. Gustav is also an entrepreneur and investor who has founded and sold startups that he co-founded to Meta’s Oculus in 2014 and then also his first startup which he co-founded and led as CEO, up until their acquisition by Yahoo! Gustav is also the host of the podcast mini-series -- Spotify: A product story -- which offers a glimpse into the decisions that have guided Spotify’s product evolution. In Today's Episode with Gustav Söderström 1.) From Selling Companies to Yahoo and Meta to Leading Spotify's Product: How did Gustav first make his way into the world of tech and startups? What was it that made Gustav so compelled to join Daniel Ek and build Spotify? What does Gustav know now that he wishes he had known when he started? 2.) "Never Fight a Macro Wind": What does Gustav mean when he says "never fight a macro wind"? What models can product leaders construct to measure the size, importance and timing of a macro wind? What can product leaders do to change the macro wind and have it blowing in their back and not their face? When did Gustav experience this? What did he change to have the wind blow in his back? How did this alter his mindset and mentality? 3.) "Do Something Completely Different to the Competition": Why does Gustav believe startups should do the complete opposite to the competition? Does this change if your competition is other startups vs incumbents? What is the story of how Spotify did the complete opposite to Youtube? Why did it work? On the flip side, when did Spotify do the complete opposite and it did not work out? 4.) Mastering the Learning Process: How does Gustav approach the learning process for all new skills and disciplines? Why does Gustav believe that all technology leaders have to be the master of their domain? How did this lead to Gustav going back to University to study machine learning? What are the single biggest mistakes people make in the learning process? 5.) Gustav: The Product Leader: Why does Gustav believe that product is 100% science and not art? What does Gustav mean when he says, "talk is cheap and so we should do more of it"? How does Gustav structure internal debates? Who sets the agenda? Who is invited? What makes a good vs a bad internal debate? How does Gustav make everyone feel safe? What can leaders do to ensure an environment where everyone feels they can debate with the boss? 6.) Spotify: The Crucible Moments: What is Gustav's favourite near-death experience in the Spotify journey? Why did Spotify decide to make the move into podcasting and video? How does that additional complexity change the product paradigm of an audio-only platform? How do the single most impactful platforms in the world approach market expansion and when to add new products? What are the best companies in the world not merely technology innovations but also business model innovations? Items Mentioned in Today's Episode: EXCLUSIVE NordVPN Deal ➼ https://nordvpn.com/20vc Try it risk-free now with a 30-day money-back guarantee!

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

• 0:00Harry Stebbings?

  This is 20 Product with me, Harry Stebbings, and 20 Product is the monthly show where we sit down with the greatest product leaders to discuss the art and science of product, scaling product teams, and much, much more. And today was such a special one, as I was joined by a dear friend and one of the very best in the business, Gustav Sodestrom, Spotify's Chief Research and Development Officer. Gustav also has the CPO and CTO responsibility overseeing the product, design, data, and engineering teams at Spotify, and is responsible for Spotify's product strategy. Gustav is also an entrepreneur and investor who's founded and sold startups that he co-founded, Tometas Oculus in 2014, and then also his first startup, which he co-founded and led as CEO, up until their acquisition by Yahoo.

• 0:41Harry Stebbings?

  Gustav is also a podcast host with an incredible mini-series, Spotify, a Product Story. It's one of my absolute favourites. If you haven't checked it out, it's a must. And I do also want to say a huge thank you to Shaq, Daniel Eck, Woody Marshall, Shishir at Coda, and many more. Some amazing question suggestions today really did make such a difference. But before we dive into the show today, we need to talk about the game-changing tool that is Miro. Are you and your product team still wasting precious time and energy going from tab to tab, tool to tool, looking for the most updated information? Well, you could be in any team and Miro would work for you. I'm a podcast host and I need to constantly be balancing the deliverables from multiple different stakeholders, whether it's my team locking down interviews, voting on potential topics for future shows, directing feedback from guests.

• 1:26Harry Stebbings?

  I need to manage a show like a PM manages a product, and information is all over the place and it causes real inefficiency. So I keep track of it all using Miro, the collaborative visual whiteboard that brings your team's great work together all in one place online. And Miro acts as this infinite canvas where ideas and projects can be shared across the team and across the tools you're probably already using. So how do I use Miro as a podcaster? Well, with every show we do, we create a new Miro board. My team takes 10 reference calls before each episode for every guest, and they compile all of their comments on a Miro whiteboard. Then I can jump into it, see all the cool notes in one place, and then write in the schedule for the show with all of them in front of me. Easy to access and all at the same time. Like I

• 2:10Harry Stebbings?

  A total game changer and that's why over forty million users are already on Miro. Get started today with your first three boards absolutely free. That's miro.com forward slash two zero VC. That's M I R O dot com forward slash two zero VC. And speaking of incredible products like Miro there, I'm always travelling and I just love Nord VPN. It is so easy to use, connect with one click. They have five thousand six hundred servers in fifty nine countries. The speed is unreal. It's the fastest VPN service out there and it works also on six different devices from iOS, Mac, Windows and more. So now I can watch my favourite movies, content and of course podcasts from anywhere on the go with no concern about my connection.

• 2:54Harry Stebbings?

  Really is such a mental security for me. Grab your exclusive Nord VPN deal by going to nordvpn.com forward slash two zero VC to get a huge discount off your Nord VPN plan plus four additional months for free. It's completely risk free with Nord's thirty day money back guarantee. That really is a must, especially if you do travelling. It's such a game changer. And last but not least, you have to check out builder.ai. They make building software so easy that anyone can do it. If you have a vision, you can build it with builder.ai. And one of my favourite products of theirs is the Studio Rapid. I always think the number one reason why people fail is they don't start. And Studio Rapid is the perfect tool for when you need an MVP fast.

• 3:35Harry Stebbings?

  And when I say fast, you can build simple, beautiful native apps on Builder in less than one day. Don't take my word for how great it is though. With leading brands like Pepsi, BBC, Fujitsu, all loving and using the product. Head over to builder.ai to find out more. But now I'm so excited to hand over is the one and only Gustav Soderstrom, Chief Research and Development Officer at Spotify.

• 4:02Speaker 01

  You have now arrived at your destination.

• 4:05Harry Stebbings?

  Gustav, this is an incredibly challenging show for me to do with like a serious face because I know you socially. I think the world of you socially. And so now I get to put on a professional face and welcome you to 20VC. So thank you so much for joining me today.

• 4:18Speaker 02

  Thank you for having me. It's an honour and likewise.

• 4:21Harry Stebbings?

  That is very kind. I've also been stalking the shit out of you for the last few days professionally. And so this has been great fun, but I want to start with a little bit on you Gustav. So tell me, how did you make your way into the world of startups and then come to lead the product org at one of the generational defining companies of our time was Spotify?

• 4:36Speaker 02

  So I'll try to do the brief version of the history of my life.

• 4:39Harry Stebbings?

  You've got three to four minutes, so just take your time.

• 4:41Speaker 02

  Then we cut. So I'm sort of actually this involuntary entrepreneur. I graduated from the Royal Institute of Technology in Stockholm, sort of electrical engineering, computer science. That was the tail end of the IT crash. So there were literally no jobs to be had. And so I found a group of friends. I wanted to work upon these big, boring Swedish companies like Ericsson or something. But I couldn't get a job. So I decided with a bunch of friends to start a company. Cause all these investments had been made during the IT era in 3G and smartphones and so forth. It was all there, but no one believed in it. So we started this company where you could send text messages over data instead of SMS. And already back then, even though you paid per kilobit, it was still 11,000 the cost of sending the same on 160 characters over text message. So that took off in a little bit in Sweden and in the Nordics.

• 5:26Speaker 02

  The problem was that the carriers back then controlled the world and they were selling SMS bundles. They didn't like that. We ended up selling this company to Yahoo because they had the biggest messenger application in the world, but it was desktop only. And they wanted to go big in mobile because mobile was starting to happen here and they had all these relationships with the global carriers. I ended up working at Yahoo in Sunnyvale for a bit and I can tell you it was a troubled company already back then. So fast forward about two and a half, three years later, and I think four or five CEOs later, I was back in Stockholm trying to figure out what to do. And through a mutual friend, I met Daniel Lick, the co-founder and CEO of Spotify. And he showed me this amazing application because Spotify already existed as an application on desktop. But what he wanted someone to head up with Spotify mobile was going to be.

• 6:12Speaker 02

  Because this was two thousand and eight and the iPhone had just come out, but there was no App Store yet. I got lucky, I had a moment in time where I knew something, how to develop for lots of different mobile phones that many other people didn't know. So that's how I came into Spotify, starting to head up a product development for mobile.

• 6:27Harry Stebbings?

  Can I interrupt you there? Because there's just two things I want to pick up on first. Number one is like Shaq actually told me about your entrepreneurial early days. One thing I've very much seen in the best product leaders is really kind of the founder mindset and that accountability and ownership mindset that they bring to product. How do you think being a previous founder makes you a better product owner and product leader?

• 6:48Speaker 02

  Well, I do think it is the ownership aspect. I can't help but think as a CEO, even when I'm at Spotify, which can be annoying for, maybe for the CEO, for my peers. Because you think about everyone else's shit as well, but I think it's important to have an holistic perspective. I kind of have to believe in the whole thing. If I don't feel I understand why Spotify should succeed, I can't help myself but asking like, why are we doing it this way? So I have that mindset and I think it's more, more helpful than not, but I can't really help it.

• 7:16Harry Stebbings?

  I've known Daniel for the last few years, but Daniel two thousand and eight. Can you just take me back? What was it about Daniel and Spotify that convinced you that this was going to be what was now a fourteen year journey? That you were going to commit to? What specifically was it?

• 7:31Speaker 02

  It was two factors. It was the people, Daniel and many of the engineers who worked at Spotify and had built this amazing product. It really was the product. When I tried it, like everyone else, I just couldn't believe that it was true. I thought it was a fake. I thought they had a file server standing somewhere nearby because it was too fast. So it's obviously the product.

• 7:48Harry Stebbings?

  Shaq was running in the background with CD-ROMs.

• 7:50Speaker 02

  Exactly. And then it was a very technology centric and sort of meritocratic idea based culture. It was like fierce debating and the best idea won out and I really liked that. So those were two other factors and Daniel was very humble. I said was, he actually still is a very humble person. He claims himself that he's an introvert, even though I think it's actually very skilled these days. But just a very mellow person, kind of personality I really like, non hierarchical, you can debate intensely with him. So those were some of the factors. The other factor was simply naivety. You know how they say that ignorance is bliss? I had no idea about the music. If someone had told me there's no chance I would have started statistically, it would have made no sense to join a music startup. But luckily for me, I had no idea, so I joined anyway.

• 8:30Harry Stebbings?

  You're clearly not a VC because there's no such thing as naivety. It's just insight and wisdom that made Spotify the right for me.

• 8:37Speaker 02

  All right. I forgot to phrase it the correct way.

• 8:40Harry Stebbings?

  I want to split the show today into two kind of separate parts. One is you have this incredible podcast series and there's a couple of core themes there that I love and I want to unpack. And then the second is really unpacking lessons from the Spotify journey. If we start with your amazing podcast series, which I love, I actually listened to it on my runs, which is, I wish it was shorter because I'm getting less and less fit. But my question to you is, you say in it, never fight a macro wind, you will lose. What did you mean by this? And can you explain that to me?

• 9:09Speaker 02

  Sure. So macro wins are these big societal changes that are sort of bigger than any one individual or any one company. So what is a macro win? Typical macro win would be cheap broadband. It's happening. You're not going to stop it. It's going to disrupt things. You should just accept it. Another one was smartphones, machine learning. It's another such macro win. These things happen. I still see a lot of companies and product people who try to fight these things as if you can stop them. This has been true for us as well. We've lived through some of these. I've literally had to learn this lesson. And what you should do instead of fighting is obviously to rethink your position, try to reposition yourself so that instead of having this wind blow in your face and slowing you down, you somehow get it at your back. But the lesson is that the quicker you accept it and reposition, the better. You're just not going to stop these things.

• 9:54Harry Stebbings?

  Can you give me an example of a macro win that you went in the face of and then pivoted and decided that it was better to have it behind your back? Just so I get a feeling for it.

• 10:03Speaker 02

  Of course, there are two good examples. One is when I joined Spotify, we had what was then a very profitable business model, which was you give the application away for free on desktop computers. Because people didn't think they wanted to pay for music. Then they started investing in music, playlisting and building libraries. And then they realized that actually wanted to listen to those playlists on the go on their mobile phones. We charged for the mobile application. So simply put, we charge for mobility and that worked beautifully for several years and we loved it, VCs loved it. A lot of money, but then all of a sudden it turned out that this macro wind was blowing called smartphones. And we started seeing people that not only use their mobile phones more than their desktop, they were mobile first, but many users that were mobile only, there was no desktop. So we didn't have a free tier at all for these users. So our business model broke.

• 10:48Speaker 02

  Now, we were not incentivized to want to see that in the short term. And we could see our user growth actually starting to slow down. But when we accepted this and we took the pain and the risk of repositioning all of Spotify, figuring out a way to give away the mobile experience for free, even though that was what we're charging for. So we literally changed the entire business model. We instead got this win at our back and we started growing, literally exponentially, actually. Very clear example, if you look at the growth curve, you can see the macro wind blowing in our faces. Then you can see when we figure it out and we got it at our backs.

• 11:19Harry Stebbings?

  Take me inside the room there. How did you get over the fear of the cannibalization of an existing business model that was also working? You make it free, you could have a lot of the premium users churn and just be ad-supported users, but free. And actually, you saw the cannibalization of existing user bases. How did you get over that concern and what did the internal discussions look like there?

• 11:39Speaker 02

  So I know precisely when we realized this, it was a deck from Mary Meeker that showed the projections of smartphone growth overtaking desktop growth. And we looked at that and we said, holy crap. So we discussed that a lot, we kind of found the confidence ourselves to do this. But the big problem we had was actually that we have other stakeholders in the labels. And the labels didn't see it, they were not looking at Mary Meeker's slides. And they were not so keen to risk the entire business model that they had just figured out. So that was actually the bigger problem. And we had to wait all up until we had stopped growing and actually started losing users before they agreed to give us the licenses we wanted. But by then, we had prototyped and researched and A/B tested a bunch of different concepts. So when we got the licenses, we actually knew what we wanted to do and had already built the experience.

• 12:22Speaker 02

  And we launched it almost overnight when we signed the contracts.

• 12:26Harry Stebbings?

  How do you know whether it's a sustainable fundamental shift that you're fighting against? Or a unsustainable one? Point being that a lot of like consumer behaviors were changed in COVID that have now come back and actually we've gone back to original behavior patterns. How much data do you need to know whether something is ongoing and continuous versus actually time bounded and temporary?

• 12:47Speaker 02

  It's a great question, and I think COVID is the perfect example because you knew that this would actually end. The question was this a fundamental shift in behavior or a temporary shift? And we had exactly this discussion when COVID started. It was much easier with something like the shift to mobile. There was no real model where you saw people going back to desktop computers. Another such macro shift is from curation to recommendation. Whereas Mike Mignano puts it from social media to recommendation media. That's not going to reverse. So those are quite easy, but COVID was hard. So we literally had the discussion, should we model this as a temporary anomaly? Keep investing, for example, in the car, even though we saw car usage dip completely during COVID. Or should we just say no one is ever going to drive again? Let's reposition for the home use case. We chose the former, we're going to model this as an anomaly.

• 13:32Speaker 02

  And we kept investing in the world going back to normal. And I can tell you that was incredibly painful because we thought it would be over in six months, then in 12 months. And 18 months later, it didn't look like it was going to go back. It's actually only now that we clearly see it going back to the normal behaviors. Home usage going down, car usage and mobile usage going up. So it's hard, but we had that discussion. We try to model the world and make predictions about how the world is going to work. I love models, basically. It's a structured way of thinking that gives you both predictability, explainability, but also shareability. If you explain your models, then others can use the same model and you can sort of distribute the way you think about the world.

• 14:09Harry Stebbings?

  What I love doing about these shows is the flexibility I have with the schedules. I'm with you, I love models too, but I'm also aware that you can't predict markets. And sometimes your model is wrong and don't try and be smarter than the market. I guess my question to you is, how do you know when your model is wrong and you actually just need to change? 12 months into your investing in the post-COVID, we will go back to normal. Should you wait six months more? I mean, especially as a public company, it's even tougher. How do you know when your model is broken and how do you know when to change?

• 14:38Speaker 02

  Yeah, very tricky question. So first of all, regarding models, there is this famous saying that by definition, all models are wrong. That's why they're called models. If they weren't wrong, they're actually reality. But the whole point with the model is it simplifies reality because reality is too complex. So they are wrong. So you're always taking a risk in data machine learning terms, you're doing dimensionality reduction. Reality has infinite dimensions and you're reducing it to maybe five. And if you pick the wrong dimensions, you didn't model the spread of a disease. It's going to be wrong because that was not a dimension you had in the real world is multi-dimensional. So that's the risk. One way to try to avoid it that comes from Berkshire Hathaway and how they think about the world is you should use at least three models with different dimensions. If they all agree, chances that you're completely wrong are much lower.

• 15:21Speaker 02

  But using one model, and I've done this mistake early in my career. You think you figure out how something works. You're like, that's how it works. And they just do the same thing again and again. And you're using a single model and you're mistaking the world for being simple. It's just that you manage the model like a small moment in time and then it breaks completely. So I've gotten better at using multiple models. There is no way to catch all of it.

• 15:41Harry Stebbings?

  One of my favorite features in Spotify is the go to radio. It is also buried like three clicks in. And I didn't know about it until someone told me about it on Twitter. And when I think about the shift from curation to recommendation being so central to the like future of content discovery and content platforms. Why is it so buried and is that a product mistake? I would love to say that's someone else's question, but it's mine.

• 16:04Speaker 02

  It's a perfect question for me. I'm trying to figure out. One answer is stay tuned, you will be happy. Another more telling answer is we made choices between what the main paradigm is. The main paradigm of Spotify was playlisting. That's what Spotify was and what we grew up around, the user curation. And then we started playlisting for you and we had to decide, should we have the radio channel as the analogy or should we have the personalized playlist as the analogy? And they kind of do the same job, a personalized playlist within a certain genre like chill. It is very similar to starting a chill radio. You will get the same songs, actually. We've struggled a little bit with which user paradigm to use. Older people, they like radio paradigms and younger people, maybe not so much. Not calling you older, but you know.

• 16:48Harry Stebbings?

  That is, it's fine, it's fine. I'm wearing a Panama hat.

• 16:51Speaker 02

  You are wearing a Panama hat. And listening to radio. You're a very old young person. So we're trying to figure out how we can combine these things. Fundamentally, it's a problem of many parts of the application sort of performing the same job for the user, if that makes sense.

• 17:05Harry Stebbings?

  Is that not a product mistake?

• 17:07Speaker 02

  I think it's a product mistake. It's very easy to add features and everyone is going to ask for many features. It is incredibly hard to remove features. And this is scientifically proven by, I think, Tony O'Connell and Adam Tursky, where they gave Harvard students a cup. First, they asked what they would pay for the cup. Then to the other half of the class, they gave the cup and asked what they would sell it for. And it turns out people value something they own 1.5 times as much as they value never having had it. That, I think, is a good product lesson. Like, it's going to be 1.5 times more painful to remove something than it was valuable to give it in the first place. So we're very careful with that. And that's the reason why we have many of those features in the app that kind of duplicate the same use case. And we're always trying to streamline it and simplify it because there is this invisible cost of the application becoming more and more complex.

• 17:50Speaker 02

  As you said, it's really hard to find that feature. That's because, even though it works really well for some people, that's because it competes with the other features. And if we put that on front, we would get another cost somewhere else. So this is the trick of like serving enough use cases, but not overcomplicating the experience.

• 18:04Harry Stebbings?

  The hard thing with Spotify, like Twitter, where users love it and it is such a part of their daily life. You have very visceral feedback and opinions, as you said there, people request a lot. How do you determine between the customer data that you listen to and engage with ingested into product roadmaps versus those where you say, I get it, Harry's moaning from London about GoToRadio being a couple of layers deep, but it's not a priority? How do you determine between the two?

• 18:31Speaker 02

  There are a couple of common tricks. One is you separate new users from existing users. You're going to get very different metrics. Existing users who have a habit, your metrics may go down for a feature. And then if you try it on new users who never had that habit, you may see that if you're not taught the old paradigm, this is actually better. It's just that you trained your user base on another paradigm. So that's one trick to figure out sort of some, what the truth is, if it's actually better in some global sense. And then you can make the choice, should we take the pain of retraining the existing audience? Because we know that if you just change the behavior, you will be more happy. Because if you never knew this old behavior, we can see that. That's one trick. The other way is to, back to radio, to try to figure out what it is you want to achieve.

• 19:11Speaker 02

  Do you really want a radio or are you looking for a session that you can tune more easily that can go cross-gen? What is it that you really want to do and see if you can present that in a way that doesn't complicate the application, but just adding more features?

• 19:23Harry Stebbings?

  I totally get you and I find that fascinating between new and existing users. I do want to touch on competition. We spoke about kind of product decision making there. Sometimes, in many cases, often for startups, competitions roadmap drives a lot of bad roadmap. You've said before in your show, which is look at the competition and then do something completely different. Always love a contrarian opinion, so this is great. But why do you believe this? Can you explain it to me a little bit on why it's better to do something completely different?

• 19:49Speaker 02

  I think this is especially important for a smaller company going up against a bigger company. If you assume that the people in the bigger company are smart and competent people, which I think you should assume, what they're doing, their strategy, probably makes a lot of sense to them. They're doing it because it plays to their strengths. Maybe they're leveraging their distribution, their hardware, their user base, their payment method. And so if you think about it, should you as a smaller player go up and try to do their strategy with less people, less budget and less assets? You're just going to become a lesser version. I mean, that's the likely outcome. So especially as a smaller player, I think you should do the opposite. Try to figure out if there is a position where that bigger player isn't playing right now and ideally doesn't even want to play because it's contrary to their business models.

• 20:33Speaker 02

  There is some sort of collateral damage of what in strategy terms is called a counter position. If you're a bigger player, it's a credible strategy to say, we see some new behavior, feature, user interface really working. Let's implement it and give it to our user base before they find it in this other user base. And you've seen this play out in the world. That's a reasonable strategy if you're a much, much bigger player. But Spotify has always been and still is a much smaller player than our competitors. So we tend to try to think about contrarian strategies.

• 20:59Harry Stebbings?

  Can you walk me through an example where you decided to do something completely different as Spotify to your competitors? Where it worked or didn't work, but where you chose to do something completely different with this mindset?

• 21:11Speaker 02

  Back to mobile, I described earlier this macro wind of smartphones started really blowing hard. And we needed to figure out a free tier for the mobile phone. It was paid only at the time. If you looked around then and you said, who are biggest competitors on mobile free music listening? It was and still is. YouTube. And so what was the YouTube experience? Music Watson is one of the biggest use cases for YouTube. They have a fantastic experience. That experience is foreground on demand playing with video. That's what you can do on YouTube. So it is amazing for discovering new music. But then when you put the phone in your pocket, the free application doesn't background. So it stops playing. We looked at this and one strategy would be that is what the market wants. That's the biggest player. We should go and get those same foreground on demand video licenses that YouTube has.

• 21:55Speaker 02

  But the contrarian approach, which we chose in this case, was to say, what if we did the complete opposite? What if we licensed a functionality that would work exactly where YouTube stops working? So we actually did the opposite. We licensed a background shuffled here, where you can play any playlist you want in shuffle mode in the background forever. But you actually can't play on demand in the foreground. So it turns out that Spotify mobile works exactly where YouTube mobile doesn't work. So we kind of said, okay, let them keep the foreground discovery that they're really good at as long as we get all the background listening. And for us, that's been very effective because it turns out that most of the listening is actually in the background. So that was an example of trying to be as contrarian as possible.

• 22:35Harry Stebbings?

  Can I ask you a bold question? How does that thinking change when Spotify now has video? I listen to all of my podcasts on Spotify. I love it as a podcast player now, but actually there's now video. And often I'm listening to it like walking and I'm kind of looking at it. And I'm in London and I'm kind of about to get run over and that would worry Shaq. How does that change your product paradigm thinking? When suddenly you do actually have to worry about user engagement and video, not just background play?

• 23:02Speaker 02

  So back to the contrarian view. Spotify is the vast majority background application. And so that's what we optimized our music licenses for. First of all, in podcasts, we don't have to license. So we are allowed to play video on demand in the foreground as well. But if you look at what use cases we're going after, because we're mostly a background application, the use cases we're going after are these long, mostly backgrounded sessions, right? Podcast typically. We're not going after the foreground sort of silent jujitsu videos that make no sense when you background them because it's just a lot of panting. We're going after the traditional podcasts. And so what we did Starting actually with the Joe Rogan podcast was we built video into Spotify. We didn't know what the usage would look like, but without saying exact metrics,

• 23:46Speaker 02

  what happened was exactly what you said. People consume the majority of these shows in the background, but they do bring it up every now and then. We are using video mostly for the talking heads format, if that makes sense. There are these famous moments of Elon Musk smoking weed, for example, on Joe Rogan podcast. It turned out to fit very well with us.

• 24:03Harry Stebbings?

  You disappointed me. I thought we could do the same. You've got some nice garden plants in the background.

• 24:07Speaker 02

  I'm in Sweden here. It doesn't work that way.

• 24:09Harry Stebbings?

  I'm in London. It doesn't work that way either. But no, I get you totally. Can I ask that? Is there a time when actually you sat around the table and you went, oh shit, we should have copied them? It could be YouTube, it could be any of the other competitors. We're actually doing the different, didn't work out.

• 24:25Speaker 02

  There are certainly tons of things we should have been faster. I think lyrics is an example of that, which we now have is very engaging. That was obvious. So we've certainly been super slow for various reasons on these things. In that case, it wasn't really because we had a contrarian view. It was actually, which is often the case because of how the music industry works. So if you work normally at Twitter or Google or Facebook or something, you're as a product person, what you do is you try to figure out what the best possible thing is that you could build. And then you try to build that. What you do when you work in the music industry is you try to figure out what the best possible thing is. Then you go to the labels and you try to license the lowest common denominator of what is licensable. And that often means that you can't build the best possible product. You have to build with much, much narrower constraints.

• 25:08Speaker 02

  And often actually the cost is a constraint because the job of a music label is to take a piece of IP and try to sell it to you as many times as possible. A foreground right, background right, video rights, sync rights, all of these rights. You can see that as very annoying as a product person, or you can do what I do and see it as constraints are what makes the world interesting. Can you do something really good even within these narrow constraints? That's actually been the biggest problem. I would say for that reason, if you think about it, there hasn't been that much innovation in music listening. It is search, playlisting and so forth. I mean, we're working really hard, but it's not like other mediums where things change completely. I think the biggest innovation clearly in the last six, seven years has been TikTok. We found like a new Format of using music for something completely different.

• 25:49Harry Stebbings?

  How do you think TikTok did that? Sorry, help me understand that.

• 25:52Speaker 02

  So it started in twenty fourteen as Musically. There was a lot of trial and error. I've spoken to both the founders. And there was a lot of trial and error and they sort of happened on this use case and they didn't start by going licensing stuff. There is a duty in being small enough that people don't care. And that's actually a problem with being big. We can't really just try things. We have to license them first, which means we take the cost upfront. So back then they were small enough to try this and they tried to do something different actually, but they found product market fit. They kind of saw in the data what people were actually doing with these clips was recording dance videos and they leaned into that. And then later they started licensing and then they got acquired by Dance and got more distribution and so forth.

• 26:29Harry Stebbings?

  Final thing on your shows I want to touch on before we dive into basically a free for all from Daniel Shaq, Alex Nordstrom, who finally actually responds.

• 26:37Speaker 02

  Thank you, Alex.

• 26:37Harry Stebbings?

  Thanks, Alex. Is a crucial one, but it's better to be lower on a taller mountain than higher on a smaller mountain. Sounds wonderfully poetic. What did you mean by this and why is that?

• 26:49Speaker 02

  When you work with something for a very long time, whether it's a certain type of machine learning algorithm or maybe a certain user interface or a business model, by definition, it's going to be very well optimized. Because you spent so much time on it, it's going to be very efficient. But that also means that there isn't that much potential left in it. Because you've optimized it, you're close to the summit of that mountain. And so that's a problem and most companies get there. If they're good, they get there. So when you're at that peak, the problem is to get somewhere, you have to sort of change something fundamental. Which in this analogy is you have to jump to a different mountain. And that may sound a mountain that has a higher summit, has more potential. The problem with that is when you jump from the peak of that first mountain, you're actually very likely to land somewhere at the base of the new mountain.

• 27:33Speaker 02

  So you're actually going to lose altitude, which means in product terms, your core metrics may go down. And in many cases, you might end up spending millions of dollars in a year just to get to where you were in the old paradigm. And as you can imagine, this is tricky in a public company, Wall Street pressure and many employees and boards and so forth. I've literally had this problem where speaking to C-levels and boards where you explain that we spent millions of dollars in a year to get to exactly where we were. Twelve months ago and people ask, so exactly why is that a success, right? But then twelve months later, you may have lowered your churn by thirty percent or something because you've iterated for another month. This notion of first having the guts to move from one mountain to another and then having the patience to iterate your way back up to even control is very tricky. But it happens inevitably and you can't avoid it because you're gonna die if you don't.

• 28:18Harry Stebbings?

  Was this the case with the introduction of podcasts? Obviously, we made the shift purely away from just music to obviously podcasts and then also kind of video podcasts as well. Was that the case where actually it took a year to invest to reach feature parity with podcast players? I'm intrigued on that one.

• 28:33Speaker 02

  For sure. Actually, podcasts was mostly additional, so we didn't go down in metrics. Those cases have been when we changed user interface, for example, completely. Or you changed a different recommendation algorithm. Or you changed something fundamental, your metrics may go down. Podcasts was different because it was mostly additional. But it is true that it took a long time. Our internal goal was get the podcast catalog on the service and build best-in-class podcast player, feature parity. That was the first stage and then obviously the idea was to pull away. To your point, that took over a year. It was painful to spend that time, but it wasn't the problem of actually losing altitude in the meantime.

• 29:06Harry Stebbings?

  Where did you lose altitude? If you think back, where was it like, oh god, we're back in the bottom of this mountain, fuck.

• 29:12Speaker 02

  So let's take the same example that we discussed and because there's context around it. When we finally launched this mobile free tier that was contrarian to YouTube and that risked our business model. What happened was, leading up to that, because fewer and fewer people used the desktop free tier, actually from the outside, what happened was our conversion metrics looked better and better. It looked like a larger and larger percentage were becoming premium. But that's not because more were converting, that's because the free user intake was going down, right? So from the industry point of view, the conversion was at an all-time high. And what do you think happened when we launched this massive free tier? It just dropped. Everyone downloaded the free app, no one converted for months, right? The MEU metrics, the growth was very inspiring. That was an exponential curve, but premium conversion was an exponential curve in the other direction.

• 29:56Speaker 02

  And as you can imagine, many people, labels and investors, were wondering if that was gonna catch up or if this was, if we were down to like single percentage point premium conversion instead of like thirty, forty percent. It did. Catch up. First, we also needed to invest in ads monetization. So basically, the analogy here is user metrics went up, but monetization, both free ad monetization and paid conversion, that dropped severely in altitude.

• 30:19Harry Stebbings?

  Are you shitting yourself in this moment? You have your board putting pressure on you. You see single digits conversion. Your investors are putting pressure on you. Are you nervous as a product leader?

• 30:29Speaker 02

  I think you should always be somewhat nervous and paranoid. And yes, I would say this. I had a lot of faith that conversion would go up because we had seen so many years that the core correlation was the more you use the free product, the more likely you are to convert to paid. We call it the more you play, the more you pay, which always made sense to me. You're going to start paying for a product you use and love. You're not going to pay for something you don't use, right? So getting it to use it more means you're going to not want the ads. You're going to want offline. You're going to want speaks. I was pretty certain of that. That was my worry. The worry when we launched this free tier was if it was actually good enough. This contrarian hypothesis that we had, it could have been BS. It turned out to be true, but that we couldn't test at scale, really. So I was very nervous about that. I think investors and labels were much more nervous about the conversion metrics and the ads metrics.

• 31:14Speaker 02

  And also, to be quite honest, I wasn't responsible for the conversion of the ad metrics. So maybe other people were very nervous about that, but they did a great job and they caught up.

• 31:23Harry Stebbings?

  It's wonderful when you don't have responsibility for certain things in the pressure zone. It's funny, speaking of other people within the org, I spoke to Daniel before the show. The number one thing that he said that I had to ask you was he said, ask him about talk is cheap. I want to dive into this. What is talk is cheap? What do you mean by this? And how does that come out in how you communicate, lead, R?

• 31:43Speaker 02

  It's sort of play on words. I believe deeply in this notion of Socratic debate. And I love debating with smart people and I fundamentally believe that if we pay these high salaries that we pay in the tech industry for what are supposedly the best brains in the world, we should really maximize the value of that sort of rented brain power. And yet I find that most, specifically most US companies, they're quite hierarchical and very smart people often don't really understand what they're doing or why, and they're underutilized. And if you think about it, that means they're actually overpaid for what they're doing, not because they're not smart enough, but because they're not leveraged enough. In the tech world, for a long time, there's been this Notion of talk is cheap and that code decides arguments. So what I decided in order to poke fun at that is to say talk is cheap. So we should do much more of it.

• 32:26Speaker 02

  In fact, just talking and debating with really smart people who are not afraid of you importantly, which I think is also sort of a Swedish societal trait that you're not so afraid of authority, is way cheaper than writing code. Writing code is one of the most expensive things you can do. So this thing of code decides arguments, I never really bought. That you should only do when you're quite sure. Writing and shipping code to millions of people and waiting weeks for A B test is not cheap. And my favorite example of this is the Greeks, and I guess it was Democritus, basically reasoned his way into the atom in fifth century B C. That shows how far you can get with just reasoning and debate. So it's very powerful. And I think if you do it right and structured ways with the right people, sometimes you can sort of reason your way all the way to the end of something and literally save years by not doing something. And so that's what I mean with talk is cheap.

• 33:11Speaker 02

  Instead of having only one ones in my teams, I tend to have a lot of quite long meetings with the entire team where we debate something. Even if it's like one person quote unquote owns it, inputs and the pushback from the rest of the team makes that person and that idea much better. And this is not new. This is what NASA has done forever. But for some reason, it's not that practiced, I feel. People talk more about the opposite, separate swim lanes rather than how to work together.

• 33:34Harry Stebbings?

  I'm going to dive in here and put my size tens in and you're going to tell me I'm a moron. I think talk is very expensive, especially in early stage companies. It's about speed of execution. It's about getting shit done. And I'm invested in a couple of companies where, oh, we want to talk, we want to debate. Yes, there's theorize on the future of privacy. No, church ship, learn, iterate, go, go, go. Why am I wrong?

• 33:56Speaker 02

  The way to think about it is there's a difference between being fast and being right. You can go very fast to nowhere. You ship code every day. But if you're fundamentally wrong, you're just going to get to nowhere extremely efficiently and fast. I've found, especially if you're doing more complex thing, and maybe this is actually because I come from the music industry, where building product had to be licensed as the lowest common denominator between three, four majors. The impact of being wrong being three, four years because that's the term of one of these licenses. And maybe we've been trained as a company to be more careful because the cost of being wrong was in Incredibly high, but I actually think that cause of being wrong forced us to model the world better and longer. Maybe because we were afraid of mistakes, but I actually think that grew into a skill at Spotify. Of course, you can debate endlessly. You need ownership, you need to make decisions.

• 34:41Speaker 02

  And Spotify has certainly been guilty of being too unclear in who owns something. And it can slow the organization down. But fundamentally, I think now we have a really good balance where quite a lot of people actually have a fundamental strategic view. And this debate builds a lot of alignment that actually makes you faster, especially if you need to do something that's bigger than your own team.

• 35:00Harry Stebbings?

  My final one on this is, I do like it in many ways, especially for larger companies. Often, more junior people or even middle tier people will not feel the security to express their true opinions against Gustav. You say something and you say it with energy and charisma and conviction. It takes quite a lot if you're new or junior to say, Gustav, I totally disagree with you. How do you think about creating environments of safety where more junior people can have debate and disagreement in a productive way?

• 35:27Speaker 02

  I saw that shift pretty clearly when we started hiring more and US people were just used to hierarchy. There were a lot of misunderstandings between Swedish people and Americans in many ways. Swedish people are better at some things, but they're much worse at other things. They do this, Swedes do this form of silent disagreement that Americans interpret as actual agreement, but it's not. You're just silent and you disagree. So lots of cultural challenges there. But I think the way to do it is to model the behavior back to what I liked about Daniel is he models that behavior. So in his team, you can debate quite fiercely. You can tell the CEO in a pretty heated voice that you disagree, you don't like that, and you're not going to get fired. I think it starts there. I try to do the same thing, having heated debates with my direct reports, often in front of their direct reports.

• 36:09Speaker 02

  And sometimes it's a little bit shocking maybe for them. They're figure like, oh, now my boss is going to get fired. And then he or she isn't, and it's fine. And then they learn that, okay, it's apparently okay to disagree. That doesn't mean to your point of efficiency that you don't need to make decisions. You need to sometimes disagree and commit. But I try to call people out in a positive way in the meeting and say like, what do you think about this? And obviously, the first time someone might be nervous, but if the rest of the people in the room said what they actually think, other people tend to as well.

• 36:37Harry Stebbings?

  And COVID changed the way that you do these sessions and these debates. And do you feel that there is a change in the quality of the debates in a virtual versus a in-person world?

• 36:48Speaker 02

  I've been trying to figure this out. I actually think some of them have gotten better. The notion of seeing everyone on screen and having to sort of mute, it's given a bit more structure. Because you have the obvious problem that some people would dominate a discussion when it's live. And I have actually seen less of that problem over Zoom. The other thing I've done, which is interesting during COVID, is I've simply put my AirPods in and then had like remote walk-in talks with individuals or with groups of people. Where you walk for a few hours and sort of group talk. So I thought when COVID happened, that what would really suffer was strategy discussions and that kind of ideation. But it hasn't. So I would say, one of the things I also tell my teams that I think is quite different from what many other companies do is I find that a lot of executives,

• 37:31Speaker 02

  they look at their org and they try to split it as much as possible. They try to divide and conquer and cut up the org in as many independent units as possible for the purposes of sort of parallelization. That makes sense from a point of view. I've chosen to do the complete opposite in my organization because even if I have a really big organization with thousands of people, at the end of the day, it's just one user who is going to use this application. They're not going to care whoever built this. They don't care about who the library team is or who the search team is. The experience need to feel as if it was built by a single developer for a single user. So when people come and talk to me about swim lanes and how they want more independence and so forth, I tend to tell them that they're doing the wrong sport. We're not doing competitive swimming. We're doing synchronized swimming. It's much harder, but it's also much more beautiful to watch. That's what we want the product to look like.

• 38:17Speaker 02

  And that means that it's quite different to work at Spotify than many other companies. You're going to have more debate because I'm always trying to synchronize my leadership team instead of trying to divide them. And basically what I believe in is this old maxim of you want to go fast, you go alone. You want to go far, you go together. Certainly Spotify wants to go far, so we over emphasize on that.

• 38:34Harry Stebbings?

  In terms of synchronizing leadership, I'm too interested. What have you done that has worked? And what has not worked that you've disregarded?

• 38:41Speaker 02

  If we start with what has not worked, the mistake you can do in this, not having swim lanes, it's very unclear who's responsible for anything. Everyone is responsible for everything. No one makes decisions, often in Spotify because they're too nice. That's actually a bigger problem than people being too aggressive. In other companies, you may have the opposite, that if it's unclear, people are gonna power grab. I've seen the opposite. It's like people don't wanna step on other people's toes, so they don't make decisions. So that's a problem with this model. So you still need to make it clear where the ultimate decision or responsibility and accountability lies. And that's a balance. If you go too far, you're gonna create a swim lane and this person is gonna run away and do something and think that everyone else in the company is a moron. And everyone else is gonna think everyone else is a moron. The tricky thing with this is finding the balance of accountability and ownership.

• 39:24Speaker 02

  So you feel agency, but still having a single strategy and having alignment. So I'm kind of forcing, let's say you own what end user experience looks like. You actually have to take your strategy, bring it up in this forum, debate it and defend it. It may be other people disagree and they have to disagree and commit. But your responsibility is to be able to explain your strategies and answer these questions. And if you're there and you can't answer any of these questions, you're probably gonna adapt. If you're there and you can answer all these questions, then it's fine. So it's sort of self-regulating, but what I'm doing is I'm forcing people to sort of bring up their ideas and have them not critiqued, but have them debated.

• 39:57Harry Stebbings?

  We mentioned like hierarchies there. Often with scaling companies, bluntly, leadership changes are very normal and they happen. And they have happened at Spotify, as they do in every company. You and Alex, I believe, are the only ones who've survived multiple layers of leadership transitions, obviously with Daniel. My question to you is, and a question from Shaq, how did you have to reinvent yourself with each stage? And what moments did you have to develop the most?

• 40:22Speaker 02

  So it sounds like it's an episode of Hunger Games. And we're the only ones for so far.

• 40:27Harry Stebbings?

  The only ones left. You're gone, cake or death, cake please.

• 40:31Speaker 02

  So I think there are two pretty distinct moments. One is in the early days, coming into Spotify and having done my own startups. Those startups were small. When, when I sold them, they were twenty people or something like that. So I had a very distinct leadership style, which I sort of learned in the army, which is leading by example. Very simple, but very effective. If you want people to do something, you just have to do it yourself first, right? So if you want your team to work weekends to hit a release, bring your sleeping bag and you sleep on the floor next to your team. If you can't code, then you go and buy pizza for the team or something. It's incredibly effective. And so for small teams, I still recommend that and I think people underestimate it. But I came to this point at Spotify where it didn't scale. You can't sleep in that many different rooms at the same time. And I just had to change and that was quite painful.

• 41:14Speaker 02

  So I had to change from this sort of leading by example. It was painful in two ways. I ran out of time, too many teams. And also you can't really be that deep on everything. So I had to change my leadership style and instead start to coach other leaders to lead teams. And that was a painful moment for me because I didn't really have any coaching or anything like that. I just had to sort of reason with myself, what is that's happening? Why am I constantly running out of time? And when you do something that works, you're likely to just keep doing it and keep doing it. So that was one challenge. Another challenge was when deep learning really happened around twenty fourteen, twenty fifteen, something like that, when it started happening. And I had been out of university for quite a long time. So I didn't really code anymore and I felt that I wasn't deep enough in this to credibly lead this change.

• 41:58Speaker 02

  Because it was very clear to me that it was a fundamental change. So I basically had to go back to school and start from the basics, start reading the math, coding, doing all the examples, bottoms up, and implementing all the code. And then this took a long time until I could start reading scientific papers and sort of educate myself on this. That was hard because it costed so much time for me and for my family. But I think it was incredibly important and it certainly paid off for me and hopefully for the company. But that was tough because this was a tough time for Spotify as well, to find all that time to re-educate yourself on something rather complex. When something like crypto comes along, if you're going to be a technology leader, you need to understand it deeply. Otherwise, you can't evaluate what you should do. So that was another moment of, okay, it's back to school again.

• 42:40Speaker 02

  You have to start coding, you have to read, you have to start reading papers. It's hard to keep up with. It's easy to slip into like, I'm just a manager now.

• 42:46Harry Stebbings?

  Totally agree. It's hard. You could have hired in, you could recruit ahead of ML, you could bring those skills in-house and remain in the same position that you are. Why did you decide to integrate vertically yourself versus add on with an existing talent?

• 43:00Speaker 02

  I mean, I'm an engineer at heart. I hate working for people who don't know what I'm talking about. If you talk to your boss and you're like, this guy or this girl doesn't have a clue what I'm talking about, I have a hard time respecting them. So that's how I feel. I feel like an imposter if I don't understand what I'm supposed to be responsible for.

• 43:14Harry Stebbings?

  Second thing, whether it's sleeping in the office with your team, whether it's the late nights running to get the pizza, whether it's the going back to school to learn ML, your family respectfully are the ones at home without you. How do you communicate the value of what you're doing to them where they see the importance of why dad's not there?

• 43:32Speaker 02

  I ask them to listen to the podcast.

• 43:36Speaker 02

  No, it is a great question. So I've heard many people talk about this. I've certainly felt it myself. You're so engulfed by your work, you get a lot of feed, positive feedback from work as long as, at least as long as the company is going well. And you try your best to be a good leader and inspiring and so forth. And then at home, you're actually not inspiring at all. You kind of suck. And so my wife, she is the one who said this, like, I need to come and see you at work every now and then. So I understand what it is you're actually good at. Because at home, I don't see it like, and I think she has a really good point there. And like, you need to be impressed by each other. And remember that because when you see yourself day to day, you mostly see the, the not so impressive side of each other. So we try to do that. I try to make sure I see her doing the stuff that she's really good at. And she's made sure that she sees and cares about some of the stuff I do.

• 44:21Speaker 02

  And then you find this like love and respect for each other and you refine it. That's the best way I've found. I try to do the same with my kids every now and then, bring them along and see what I do. And that helps. But there's no cure for like, you want to spend time with your family. And I am quite religious about that.

• 44:35Harry Stebbings?

  Esther Perel, who obviously spoke your brilliant minds, and I'm sure you know well, but she says you're most attracted to your partner when they are in their element. When your wife sees you leading a product review. She's like, oof, Gustav, baby, I'm sure. And likewise, vice versa.

• 44:49Speaker 02

  I hope so.

• 44:50Harry Stebbings?

  Final one on, on actually just you, and then we're gonna do a near death experience and then wrap up with a quick fire. Do you have any other, I've seen you and your wife, and it's this beautiful marriage and relationship. Do you have any like genuine relationship advice to me on what it takes to have such a strong and loving marriage and relationship?

• 45:07Speaker 02

  Tricky question. I mean, I actually met my wife when I was twenty, twenty one. She was nineteen. We didn't marry for many years. We had a very long sort of trial period. It's like a freemium model, right?

• 45:20Speaker 02

  So when we married, we were pretty sure. So we worked together for a long time before we married. I was working quite hard. I was traveling the world before I started working very hard. She studied and traveled. We lived in different places. So we had a lot of freedom and had known each other for quite a long time before we actually started living together. So I think that was important. Neither one of us felt I need to go explore and feel like I'm missing out. We had done many of those things, even though we met earlier. I would also say that my wife and I were certainly different in many ways, but we are very similar in values. We almost never have disagreement on sort of values or what we think about things. Then we are very different in terms of our skills, completely different, and I think that's a benefit. She's fantastic at the things I'm really bad at. We complement each other really well.

• 46:02Harry Stebbings?

  And we all share a common dislike of like loud music and parties. I remember congregating with you in a corner, but no, I totally get you and I appreciate that. Final one on just the leadership, I do have to ask you, you come across as so self-assured, confident with conviction. When you review your leadership today, Gustav, is there any elements where you're like, I could be better here? That is a weakness of my leadership.

• 46:23Speaker 02

  I think everyone has imposter syndrome. And certainly when you, when you're fortunate enough to work in a company that grows this much, even if you have the same title, I've been sort of CPO, CTO for several years. It changes every year because first you're a CPO of a tiny Swedish company, then you're a CPO of a Scandinavian company, then of a global company, and then of a listed New York company. The job changes all the time and every time you feel like there's no way I can be that person. You're an imposter all the way, I think. I think I've grown to understand my weak spots better with age. I already told you one, which is. I sort of have this global CEO perspective, which is helpful. I think it's one of the reasons why Danny likes having me around.

• 47:01Speaker 02

  Because he feels like I care about the outcome of the company. But it is also tricky when you get in other people's shit. That's always tricky. So I have all kinds of flaws.

• 47:10Harry Stebbings?

  I would also say elegance of communication. It's tricky when you get in other people's shit. Gustav wonderfully put. I mean, so beautifully elegant. The final element that I do have to touch on before a quick fire. I spoke to Mignone before the show and he said, there are many like near death experiences that are kind of wonderfully entertaining slash educating. If you were to choose your kind of favorite near death experience to tell, what comes to mind for you?

• 47:34Speaker 02

  Well, like Mike said, there are actually a few. I've seen Spotify have negative growth, actually losing users and contracting at least twice. And I I'd speak to people in the industry. It's very rare. People have seen that, but the company never survived to talk about it, right? It's very rare to actually see it and survive. But I think the favorite near death experience story that I don't think is widely known. Quite early on, we talk about the labels and negotiation with the labels as sort of being frustrating, but it's not in a sense, because it is their job to represent these artists and try to maximize the value of their IP. And I actually think they're doing a good job of it. It can be frustrating as a product person, but we've developed this really good relationship with the music industry and these labels. But early on, it was different. I don't know that they actually believed that Spotify would work. Maybe they felt that this you could get access to cheap VC money here,

• 48:18Speaker 02

  expecting us to sort of belly flop over. And so it was more a tenuous relationship and they certainly didn't understand the model. And so they were very scared of the free tier, the desktop free tier. And their notion was that if you just make the free experience worse, more people are going to convert. And I was of the opposite notion, as I said, I think the more you play, the more you're going to pay. That's what the data showed. But one of the labels sort of put a gun to our head and said, you can't have a free tier anymore. In that case, we're going to pull our catalog from free and premium. And so for us, we decided it was existential and we decided to fight it. So we built this thing called the switch, a switch that you could pull that would basically remove like, I don't know, quarter or third of the music catalog.

• 48:56Speaker 02

  Will break everyone's playlists, basically be horrible experience for both free and premium users, while our competitors would have full catalogs, so probably catastrophic. Decided to fight it and say this is important enough that we have to take that risk. So we built this and I remember sort of being responsible for the one should pull the switch. And we had a team negotiating the licenses. So we were supposed to pull the switch at midnight and basically take off this catalog. And millions of users would get this matches like your music is gone. Somewhere around half past eleven at night, we were sort of starting to say our goodbyes to each other.

• 49:29Harry Stebbings?

  Iconic.

• 49:30Speaker 02

  And that was a pretty scary moment. And then the call came in not long before midnight that they had backed down and we could keep this catalog. And so for me, that was sort of our Cuba crisis. I think we were very close to total annihilation in that moment.

• 49:44Harry Stebbings?

  God, that is pretty terrifying. Why did you decide to fight?

• 49:47Speaker 02

  I don't think we had a choice. We believed in the strategy we have. We believe that this was the model, at least for us. Premium was the only model. We had seen other players, I think it was like Nokia comes with music and stuff, who tried to go straight to premium. And it didn't work. People didn't think they wanted to pay for music at the time. You needed a free tier. For us, we had to make sure that this was a credible threat, that we were actually prepared to go down. And we were, we would have. I don't know what would have happened, but we were.

• 50:10Harry Stebbings?

  Final one for the quick fire. You mentioned the constraints that labels bring and that licensing brings. If labels and licensing were entirely Spotify's, entirely integrated, just in a hypothetical world, from a product perspective, with the removal of constraints, what would you do in an ideal world?

• 50:25Speaker 02

  I think what I would do is I would try to make the music experience much more interactive. I think this is what you see with TikTok as well. I think users want to participate in the music. They want to use the music. Today they can use it to make dance videos, but I think there are so many talented musicians out there. But the licensing world means that they can't use a beat from the song that they love. If you think about coding as an analogy, when you want to learn to code, what you do is you go to GitHub and then you have this vast library of open source code that you can use and you can look at and you can start prototyping from and building and learn. There isn't anything like that in music. There is no GitHub for music. That's probably what I would change. And I think that's the reason why music has actually had very little innovation. The track is sort of still three minutes and an intro and two choruses, a hundred years later almost.

• 51:09Speaker 02

  That's probably what I would try to do, just innovate on the format.

• 51:12Harry Stebbings?

  I read somewhere about Olivia Rodrigo and how she has Changed the structure of her actual songs to accommodate the changing algorithms of music, whereby choruses are much more brought forward. Is that true? And is this a new music creation process to fit technology?

• 51:28Speaker 02

  Absolutely true. We've seen small versions of that as well. When you move from the download world to the streaming world, there is in a financial sense, no marginal cost to try another track, which means you're going to start exploring more. So it gives more artists an opportunity. You're also going to start to listen to a lot of new music, like sleep music and focus music. Whereas if you paid a dollar per three minutes, you probably wouldn't soundtrack your sleep. Entire industries popped up because the business model changed and they adapted the music. But you also see it because people now have shorter attention spans. You can see the chorus moving closer and closer to the beginning of the song, right? Everyone is trying to optimize for the first few seconds. And I don't know if I think that's good or bad, but it is what it is. Like incentives and systems drives behavior for sure.

• 52:10Harry Stebbings?

  No, I totally agree. We see it on TikTok. It's all about grabbing the attention in the first second and a half, which is absolutely knackered when you get to my age, Gustav, and you have to be in front of the camera. But anyway.

• 52:20Speaker 02

  That's why you have a hat.

• 52:22Harry Stebbings?

  But I want to dive into a quick fire. I could talk to you all day. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

• 52:27Speaker 02

  That sounds good.

• 52:28Harry Stebbings?

  This one was actually from Daniel, which is what is the future of podcast and audio? And he added, will future Harry have a job? Which was an unnerving addition.

• 52:38Speaker 02

  I can't say exactly what it is. That's a secret. But what I can say is that I think it is at least as large as social networking, two, three billion plus. The way I think about it is, I think music and actually podcasting is a core human behavior, like communication. And that means that the total addressable market should be the same. That's the reason that I keep working here. I think we're far from scale at this business.

• 52:59Harry Stebbings?

  Not on schedule, but I'm intrigued. Do you agree with Mike Miniano's suggestion of the disregard of the social graph and the movement into the media recommendation engine?

• 53:10Speaker 02

  For sure. Spotify went through this journey and this is one of the macro wins that we saw quite early. And Mike and I have discussed this at length. Spotify started as a, I wouldn't call it social media, I would call it curation media. Different version of the same thing, which means the internet started with you taking some. Something offline, friends, books, music, and then asking users to curate it into graphs, playlists, friend graphs. That was the pattern, right? And that's where Spotify grew up. And then it shifted from curation to recommendation, where users weren't prepared to put in all of that work to soundtrack themselves. We actually had an in-between, which was editorial, where we had editors, so professional playlisters that helped curate for you. But the natural extension of that is to start combining the editors with machine learning, right? And now we have many pure machine learning sets.

• 53:52Speaker 02

  So we actually made a bet on the shift from curation to recommendation or social media to recommendation media four, five years ago, and rebuilt the application quite drastically. And today, I would say we are a recommendations-based company, much more than a curation-based company.

• 54:05Harry Stebbings?

  Completely unfair again, but joys of it being my show. Which competitor do you most respect and why?

• 54:11Speaker 02

  I have a great deal of respect for all of these sort of big tech companies, the usual suspects, the Google and YouTube, Apple, Amazon, Facebook and so forth. But what I think is interesting specifically and impressive about this set of companies that I think is different from the previous set of companies, I think there's a reason we call them technology companies. And some people say, that makes no sense. Car companies were also technology companies at the time. Everything was a technology company until it became old. But I do think these companies are a bit different, because I do think they think of technology itself as the strategy. What do I mean by that? I mean that people try to label them. They try to label Amazon as a book company, and then as a book and diapers company, and as an everything store. Then they started doing AWS, and like, people can't like pin these companies down.

• 54:55Speaker 02

  Same with Google. They were a page on the internet, search page. Then they became the start page of a browser, and then they became the start page of a browser of an OS. And they did email, and then they did photos and so forth. These companies, they refuse to be categorized as what they are, and they keep changing all the time. And I think it's because they think of technology itself as a strategy. So technology is this gift that is going to present opportunities to you every five years. It's going to be a broadband, a smartphone, an AI, a crypto or something. And the job of this company is not to say like, no, we're a car company, we're going to do cars. They're saying, no, we're a technology company. We're supposed to understand and master these technologies very quickly and then figure out how we can change our business model to leverage these things. And that's why they keep changing.

• 55:35Speaker 02

  And so I think there is some chance that these companies will be around longer because they refuse to answer the question, what are you? They just say like, I don't know, ask me tomorrow. They keep changing. And that's how I want to think about Spotify as well. It's one of the reasons we went from music to podcasts and now to audiobooks. When people sort of wanted to keep us in that, you're a music company, shouldn't be doing this. And then it's like, okay, I guess you're an audio company, but you definitely shouldn't be doing video. People want to sort of keep us back, but I don't think there is any stopping. I think you always need to like ladder up. And so I think of us as a technology company in that sense. My job is to understand technology and how we need to repossess ourselves all the time to leverage this new technology. Like, there's no reason why that we would be at the end of history right now in terms of technology.

• 56:15Harry Stebbings?

  It's one of the biggest lessons that Shaq taught me, which is like, people always want to put you in a box, number one. And two, you have to earn the right to do the next thing. But what's got you to where you are, won't necessarily be what gets you to the next thing. And actually, you have to change and adapt. And it's one of the biggest transformations I've had, again, thanks to Shaq. Which product leader outside of Spotify do you most respect and admire?

• 56:37Speaker 02

  People answer mostly the same things, but to say something unexpected, there is a product that I've specifically fallen in love with over the last year. I actually don't know the name of the product leader. Yeah, I try to learn new stuff every now and then. And after machine learning, I took a break. And then now I'm trying to learn a few new things. And one of them is playing the piano. When you're working at a music company, you should probably be able to play the piano. I've been using this application called the Simply Piano. You hook up to your piano over a meeting. I really like it for two reasons. First is really good application. What you want to do when you start to play piano, you don't want to start with these child songs. You want to start right away with the rock songs. So what they've done is they painstakingly, and I have a lot of empathy for this because I work in the music. They've painstakingly licensed all the popular music.

• 57:20Speaker 02

  So you literally get your Taylor Swift or whatever it is that you want to play. And then they've staged it so that you start playing and you're actually only filling in a few notes here and there. But it sounds amazing. You think you're a full bleed piano rock star from day one. So you're having a lot of fun. It's like a competition. You get scores for hitting the right notes at the right time and so forth. It's like a little game and it takes like maybe five minutes to master a song. And then it gets progressively harder. And at the end, and I know because I am at the And I got this sort of end of year note from them where it said I was the top one percent of their user base. As I've gone to the very end, at the end, you're actually playing the full songs with all the chords, accompaniments and so forth. That's actually my favorite application right now.

• 57:57Harry Stebbings?

  The hard thing is like often for me as an investor, great products don't always lead to great investments. Fundamentally, a lot of products like that, listen, as great as the products are, unless you get the incentive frameworks right for usage. Point being, it doesn't lead to a great investment often. And that's the thing that I find so hard as someone who loves product as much as me. Is you have to be more multifaceted. Does that make sense?

• 58:18Speaker 02

  It does. And actually, I'm glad you brought that up because you asked about like insights sort of through my career. I've always been incredibly passionate about technology, even for the sake of technology and product. And I find so much joy in like, I wonder if we could build this thing, just see if we can build it. And at the beginning of my career, that means you undervalue the importance of the business model. But what made it click for me, and I think this is true for many, so what I talk to my teams about now is the greatest innovations are when you find a new technology and you change not just the product and how you use it, but you change the business model. Those are always the most disruptive changes to some people who care mostly about design or product. It may almost feel like making money is something bad and something negative and it's only VCs who care about money.

• 59:00Speaker 02

  The way I phrase it is, if you want to build the greatest product on earth, it's going to require a lot of engineers. If you have a twenty percent margin and your competitor has a forty percent margin, you both make a dollar, they're going to hire twice engineers. They're going to build twice as good a product. You want to finance that product passion. So you need a good business model. I found that a useful way to get people more interested in how you can innovate on business models as well. My big passion is actually to try to combine consumer innovations with business model innovations. It's much harder, takes longer, but if you can do it, it is the most exciting thing and it tends to have the most impact.

• 59:33Harry Stebbings?

  Do you think there is a business model innovation, I cannot believe I'm saying this, with web three and crypto?

• 59:38Speaker 02

  It's a tricky question. I love crypto from that technology angle. I'm a sucker like many people for this. This is like a true computer science innovation. I'm very excited about the possibilities of trustless cooperation and so forth. But like everyone else, in the very near term, maybe a bit disillusioned with. The fact that while the promise is there for sort of trustless cooperation, actually, one of the biggest problems seems to be how you trust other people on this network. And you sort of go back to the web two world to actually verify who someone is. So I think it's early. I am fundamentally excited about it from a technology point of view, but I don't yet have a have an opinion on if there is a business model there. I have a feeling that like AI and other things, it will take quite a long while.

• 1:00:18Speaker 02

  There is a chance that it becomes a fundamental part of the infrastructure just further down, that it actually powers a lot of things and is very valuable. But it might not actually be on the consumer end. That might be one of the mistakes that consumers don't care so much about cryptography. But if it can solve fundamental problems like on the TCP IP level, could be incredibly valuable.

• 1:00:35Harry Stebbings?

  Penultimate one for you. What would you most like to change about the world of product? So like mine is like the rise of like operative product leaders. And what I mean by that is the operative product leaders bring in process bureaucracy. The only word they ever say is alignment and they do very little. But they bring this red tape and process and they really irritate me.

• 1:00:56Speaker 02

  I did spend a lot of time earlier in my career on frameworks and models to work efficiently. We had some internal frameworks and we used lots of external ones. I don't spend so much time on it anymore because the company is so big that the different product leaders within my org, they tend to have their own processes. At a sort of higher level, what I would like to change is to try to demystify it. Some trying to do through the podcast, people talk about whether product is science or art. And most people tend to answer that it's art, but I think that's mostly for self preservation purposes. It's the it's called conspiracies against the lathe, as Bernard Shaw said. You want to protect your own profession by making it seem really hard. There are lots of product people who have seen a lot of products, so they have good instincts and they can make the right decisions, but they can't explain it.

• 1:01:38Speaker 02

  And then it looks like art. I think the really good product leaders, they can actually explain their thinking. That's much more valuable because then you can share it. So I actually think product is a hundred percent science and zero percent art, which I know is going to upset some people. I feel like my mission then is to try to demystify it, for example, through the podcast and make it much more accessible.

• 1:01:56Harry Stebbings?

  I'm being divided. If you think it's a hundred percent science, then it is a hundred percent replicable. And it is not a hundred percent replicable. It is clear that like Tony. Fidel, Scott Belsky, the innovations and creativity that come from visionaries like them, and I would say from you, absolutely in the same category, I'm defending you here. You are wrong. It is not because we can't replicate Gustav a hundred times over. That's why you are you.

• 1:02:20Speaker 02

  But I think really great leaders, they are able to introspect themselves, synthesize how they think about something. It is hard to do, but it is possible, and then try to scale it. And if you can do that, it makes the entire company much better than you bottlenecking the entire company. I actually don't make a lot of the product decisions at Spotify. I have lots of opinions and I sit in these meetings, but I feel like I managed to build a team that is at least as good and often much better than myself at product instincts. And I think that's because we've spent so much time trying to understand and talk about how we think about the world. Instead of just saying like, no, my neural network here has a lot of pattern recognition, so I'm going to say what's right. Of course, great product leaders who have seen lots of product, they're going to make the right decisions because they have pattern recognition.

• 1:03:04Speaker 02

  But that doesn't mean that it's impossible to try to figure out why you have that recognition. It's just much harder. And oftentimes you're like, I just know that this is right. Just trust me. I don't want to spend the time talking. If you were forced to, you could try to walk through the steps of understanding why. And I think those lessons are the most valuable part. So I want to argue that it is science. It doesn't mean that science is easy, but I still think it's science, whether you happen to have very good instincts and then you've just internalized the science. It's still science.

• 1:03:29Harry Stebbings?

  What's your favorite memory of working with Shaq, the many years with Shaq? I have many, but I'm intrigued.

• 1:03:34Speaker 02

  What I think is special about Shaq and why he is such a core part of Spotify's history is that, as I said, Spotify is from one view, a tech company, kind of grew up in this era of leveraging new technology. And as I said, that's, I think that is our core, trying to always understand new technology. But it is also right in between this world of nerds and hardcore tech like myself and rock and roll. And that's always been really interesting at Spotify. When you're sitting and you're writing code and then Kanye West comes and knocks on your shoulder. And there are these surreal moments and Shaq happens to be responsible for most of them. He has this incredible ability. I haven't met a person that doesn't like Shaq. And I think he is the embodiment. For me of marrying the technology world with Hollywood and the music world.

• 1:04:19Speaker 02

  And it's very hard to find that kind of person in a company like this. And to get that person to be able to work in a company like this. As you can imagine, Shaq is not a big friend of like product processes and reviews and stuff. But Daniel has managed to to make this work and have Shaq run these special operations for Spotify throughout the years that have been incredibly impactful around our US launch and all these artist relations. It's just a very hard person to describe, fascinating person.

• 1:04:45Harry Stebbings?

  I always say he sees in you what you don't often see in yourself, which is an amazing.

• 1:04:50Speaker 02

  That's very well put.

• 1:04:51Harry Stebbings?

  I've had time to practise it, Gustav. Listen, I've so enjoyed this. This has been fantastic. Thank you so much for joining me and I cannot thank you enough for today.

• 1:04:59Speaker 02

  Likewise. Always great speaking to you and always love talking product.

• 1:05:05Harry Stebbings?

  I don't know about you, but I thought that was one of the most incredible discussions. Gustav is one of the most authentic, genuine and humble leaders in the business. I so love doing that show. If you'd like to see more from us, of course, you can on twenty vc dot com. But before we leave you today, we need to talk about the game changing tool that is Miro. Are you and your product team still wasting precious time and energy going from tab to tab, tool to tool, looking for the most updated information? Well, you could be in any team and Miro would work for you. I'm a podcast host and I need to constantly be balancing the deliverables from multiple different stakeholders, whether it's my team locking down interviews, voting on potential topics for future shows, directing feedback from guests. I need to manage a show like a PM manages a product and information is all over the place and it causes real inefficiency.

• 1:05:50Harry Stebbings?

  So I keep track of it all using Miro, the collaborative visual whiteboard that brings your team's great work together all in one place online. And Miro acts as this infinite canvas where ideas and projects can be shared across the team and across the tools you're probably already using. So how do I use Miro as a podcaster? Well, with every show we do, we create a new Miro board. My team takes ten reference calls before each episode for every guest and they compile all of their comments on a Miro whiteboard. Then I can jump into it, see all the cool notes in one place and then write in the schedule for the show with all of them in front of me. Easy to access. And all at the same time. Like I said, a total game changer. And that's why over forty million users are already on Miro.

• 1:06:32Harry Stebbings?

  Get started today with your first three boards absolutely free. That's miro.com/20vc. That's M I R O dot com forward slash two zero V C. And speaking of incredible products like Miro there, I'm always travelling and I just love Nord VPN. It is so easy to use. Connect with one click. They have five thousand six hundred servers in fifty nine countries. The speed is unreal. It's the fastest VPN service out there. And it works also on six different devices from iOS, Mac, Windows and more. So now I can watch my favourite movies, content and of course podcasts from anywhere on the go with no concern about my connection. Really is such a mental security for me.

• 1:07:14Harry Stebbings?

  Grab your exclusive Nord VPN deal by going to nordvpn.com/20vc to get a huge discount off your Nord VPN plan plus four additional months for free. It's completely risk free with Nord's thirty day money back guarantee. That really is a must, especially if you do travelling. It's such a game changer. And last but not least, you have to check out builder.ai. They make building software so easy that anyone can do it. If you have a vision, you can build it with builder.ai. And one of my favourite products of theirs is the Studio Rapid. I always think the number one reason why people fail is they don't start. And Studio Rapid is the perfect tool for when you need an MVP fast. And when I say fast, you can build simple, beautiful native apps on Builder in less than one day.

• 1:07:58Harry Stebbings?

  Don't take my word for how great it is though. With leading brands like Pepsi, BBC, Fujitsu, all loving and using the product. Head over to builder.ai to find out more. As always, I so appreciate all your support and I can't wait to bring you an incredible episode with Tristan at DBT on Friday.