Hamilton Helmer & Chenyi Shi on How to Build an AWS-Like Second Business

7 Powers author Hamilton Helmer and his Strategy Capital colleague Chenyi Shi join us again to discuss their latest research on a topic that’s highly relevant to the recent Acquired canon: how to build a second business line. This incredibly important “transforming” question faces every great company who has achieved initial product success (as well as their investors). Do we continue solely along the established path, or do we attempt to grow new branches on the tree? Some companies grow new businesses with tremendous success — Amazon and AWS, Nintendo and video games, Nvidia and CUDA — yet many others fail miserably. For the first time Hamilton and Chenyi share their research-based playbook on how companies should approach this decision and choose wisely. Tune in! Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Link to Hamilton's 2-Axis Chart https://uploads-ssl.webflow.com/5c29380b1110ec92a203aa84/642c3b165bd52ec4b2b3baff_Screenshot%202023-04-04%20at%207.55.48%20AM.png Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.

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

• 0:00Speaker 00

  Oh, I'm sorry. Before you keep going, is this going to be a question of is this a scale economy or network economy?

• 0:05Ben Gilbert?

  Yes.

• 0:06Speaker 00

  Oh, damn. Go for it, Jenny, because I don't know the answer.

• 0:10David Rosenthal?

  We've stumped the experts.

• 0:29Ben Gilbert?

  Welcome to this special episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert.

• 0:37David Rosenthal?

  I'm David Rosenthal.

• 0:38Ben Gilbert?

  And we are your hosts. Eight years ago, I pitched David on an idea for two different podcasts. One was on grading technology acquisitions that became acquired. The other idea was to do episodes on companies that managed to create two separate multi-billion dollar innovations. Our hypothesis is that most companies have really one big founding insight and that the rest of the company's history is just drafting on that. Well, Hamilton-Helmer and Chen Yixi, friends of the show, coincidentally have been exploring literally exactly that idea. And they've been asking questions like, what percent of the profits of the biggest companies

• 1:19Ben Gilbert?

  in the world came from a second business line? They have a new framework, in addition to Seven Powers, to help founders answer the transforming question. If I were to expand the scope of what my company does, how should I go about it?

• 1:35David Rosenthal?

  And this is a particularly interesting time to do this episode with them, because I feel like a bunch of the companies we've covered recently on the show, this has been like a key part of the story, whether it's Amazon and AWS, or LVMH, and how all the businesses, LVMH itself, have been transformed over the years. And even particularly, I'm thinking about Nintendo and our Nintendo series and going from like a supplier for the Yakuza to dominant video game console manufacturer.

• 2:05Ben Gilbert?

  Yep. And David, I can say you and I have already recorded this interview with Chen Yi and Hamilton and like we address exactly that. So listeners, this was a really fun one to do. And having Hamilton and Chen Yi on, it just concretizes a lot of the very abstract thinking that we sort of banter about on the show, but never quite crystallize. They crystallize it for us.

• 2:25David Rosenthal?

  Yep.

• 2:26Ben Gilbert?

  Well, if you want to go deeper, you can become an acquired LP to come closer into the acquired kitchen. We have bi-monthly Zoom calls and we just announced that we'll be asking our LPs to help us pick future episodes. So you can join at acquired.fm slash LP. Subscribe to our second show, ACQ2, formerly the LP Show, which is now public for expert interviews with founders and investors. Search ACQ2, no space in any podcast player. Join the Slack. There's now over 15,000 smart, thoughtful, kind members of the acquired community at acquired.fm/Slack. It's pretty cool, but I will say that only represents like 5 to 10% of you who listen to acquired every month. So for the rest of you who haven't joined, come join us in the Slack.

• 3:12Ben Gilbert?

  All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 3:31David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote "shadow AI" running with no security review at all.

• 3:52Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half.

• 4:14David Rosenthal?

  In half? Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 4:32Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. Without further ado, this show is not investment advice. David and I may have investments in the companies we discuss and this show is for informational and entertainment purposes only.

• 5:11David Rosenthal?

  Hamilton and Chen Yi, welcome back for the third time to Acquired.

• 5:17Speaker 00

  Our pleasure. This all is great to be here.

• 5:20David Rosenthal?

  The acquired audience has grown so much since the last time we did this together. We thought it might be fun first to sort of humanize the seven powers a little bit and do a little background of what is this thing that we talk about on every acquired episode? And how did the two of you come to be world experts in this?

• 5:37Speaker 00

  Yeah, yeah. Delighted to do that. So as I've said, I think on other episodes, my understanding as an economist is that ground zero for economic vitality is the strength of the entrepreneurial sector. So there's a famous economist called Joseph Schumpeter who sort of posited that. And that was different than sort of normal economic theory at the time because it was very dynamic and not sort of mathematical. And so I believe that very strongly. And of course, Silicon Valley is a center for that. So the thing that really interested me was can I contribute to that in any way?

• 6:20Speaker 00

  Is there anything that I can do that helps with that? And my discipline is sort of business strategy. And so there's a real question about is there anything useful that business strategy can add to that sort of creative, dynamic effort of all these people? And I'll queue it up with an example that I used to use in my class at Stanford sometimes, which is that if you can imagine me holding up two devices.

• 6:47Ben Gilbert?

  See, that's the iPod with the touch wheel. And I have no idea. Is that a calculator?

• 6:53Speaker 00

  Right. So that's the first handheld calculator in the United States, Boomer. And so here's the issue is that here are these two devices. They were wildly successful to begin with incredible product market fit. Boomer went from maybe 3 million to, you know, 100 million in a couple of years, which back in those days was real money. And of course, calculators are an interesting starting point because, you know, the Japanese calculator, Busycom, was sort of what started the whole CPU revolution. And so tremendously successful. And you all know the story of the iPod. That was the beginning of Apple as incredible business

• 7:35Speaker 00

  model. But it also was the precursor to the iPhone. Boomer, on the other hand, and this speaks to why Seven Powers.

• 7:43Ben Gilbert?

  Not exactly a household name today.

• 7:45Speaker 00

  Right. You'd never heard of it. So that dates me and you.

• 7:51Ben Gilbert?

  So you might be saying that innovation is not sufficient.

• 7:54Speaker 00

  Yeah, innovation or disruptive technology is not sufficient. It was very disruptive. If you were an Abacus maker, or a Monroe calculator maker, it puts you out of business. Very disruptive, but completely went out of business after a while. And it had tremendous brand recognition was the thing. And this huge spin up. And that speaks to strategy.

• 8:18Speaker 00

  So what you wonder is if you're helping the people founding those companies, is there anything that you could say that would maybe guide them to be a little more iPod-ish and a little less Bomar-ish, right? But the problem with that is that the nature, as the two of you know from your acquired site, as well as all the other things you've done, the nature of developing business is adaptive and evolutionary. It's not like you sit a bunch of bright people in the room and you figure out the strategy and say, okay, we're just going to execute from now. It's you go forward in time and effort and new information comes in. Oh, that customer didn't do what I thought.

• 9:04Speaker 00

  This competitor is coming in this way. The technology frontier has changed, all this stuff. And you have to adapt to that over time. And so the problem with that is that, okay, well then, if it's that way, how does a body of thought contribute to that? And the answer to that is that if you can provide a useful mental model, or as Jin Yi calls it, pattern recognition, you provide something so that as entrepreneurs are moving through space and time, they can see what's a little more likely to end up iPod-ish and a little less likely to end up Bomar-ish. That kind of mental model is actually hard to construct.

• 9:49Speaker 00

  And what I say in the book is that the very high hurdle that it has to clear is that it has to be simple but not simplistic. So simple, it has to be that way or people won't remember it. If it's some complex theory that you have to go back and look it up every time, it's not going to help a lot when you're making business decisions. And not simplistic means that it's got to cover most of the situations you face. In other words, it has to be relatively exhaustive. And that's a high hurdle. So there were a number of strategy frameworks before that were extremely interesting and made great contributions, but weren't simple but not simplistic.

• 10:31Speaker 00

  Probably the most prevalent was Porter's Five Forces, focused on what he calls industry attractiveness. It was a tremendous contribution, but it's not insufficient. If you're in an attractive industry, it doesn't get you the kind of security that an iPod has.

• 10:48Ben Gilbert?

  Right. Samsung is in an attractive industry called smartphones, and yet their P and L looks quite different than Apple's.

• 10:55Speaker 00

  Right. And there's been statistical work just buttressing that point more generally, that industry attractiveness doesn't explain a lot of firm differences in profitability. Another one was Christensen's work on disruptive technologies, which is just phenomenally interesting and highly erudite, but this example is perfect. Disruptive is actually not correlated with long-term profitability. It has to do with product market fit. It basically says you've come up with a better way of doing something that takes out the incumbent. It disrupts it. So very interesting in that frame, but not for the BOMAR iPod

• 11:35Speaker 00

  problem. And then there's a whole strain of thought around capability analysis. You can do a lot of things with capabilities, but it's not common that that's the basis of why you build great business models. Other people have those capabilities as well. So what that meant from a concept development framework is that I sort of had to go back to square one and say, okay, I'm thinking about pattern recognition for entrepreneurs. What's simple but not simplistic? And one of the keys to that question is persistence, which is that if you were to say Apple's profitability next quarter, it's not a random

• 12:19Speaker 00

  draw, right? It's highly persistent. And there's statistical work on that that suggests that's generally true for, you know, very successful companies.

• 12:28Ben Gilbert?

  And importantly, not just next quarter, but four quarters from now and eight quarters from now. You sort of have a pretty high level of confidence. You know, we don't know 10 years from now, and that's what we're going to get into on this episode, but we know a year from now.

• 12:41David Rosenthal?

  Bezos always used to say the line, this quarter is already baked. This quarter was baked three years ago. I'm working on a quarter five years from now.

• 12:49Speaker 00

  Yeah, there's that. But I think also the fact that he says that this quarter is baked also sort of tells you about something about the business model in a way. And so that persistence tells you that there are economic structures.

• 13:06Speaker 00

  That create attractive outcomes. And you then ask the question, can you generalize about those? Because if you can generalize about those, then you know, maybe you can get to something sufficiently simple and yet comprehensive that is useful to entrepreneurs. And so after looking at that for decades, my conclusion was that actually it is simple. There are only seven of them. And in fact, if you're dealing with startups these days, it's usually a smaller subset of that. And so that to me was a fairly profound insight.

• 13:47Speaker 00

  And that's what seven powers is. It's just those structures that if you can get there, make you more iPodish and less Bomarish.

• 13:55Ben Gilbert?

  And a key piece that I always have forced myself to remember whenever I'm analyzing a brand new business idea and trying to run it through the seven powers framework is seven powers is about defending the castle and less about, is this a good idea or not? It is a second invention after product market fit to create a durable business.

• 14:18Speaker 00

  That's right. Gee, I wish I had said that.

• 14:20Ben Gilbert?

  I think you did say that. I think this concept of a second invention is literally your words from a previous episode.

• 14:26Speaker 00

  So product market fit and power are more or less orthogonal. There are some complexities in that statement. And I'll tell you something, Ben, dude, that has occurred to Chen Yi and myself over the last year, which is a little bit different, maybe than what's said in the book, which is that I used to think that it was sequential. You get product market fit and then you deal with power. But my biggest education is talking to founders. I love their intelligence, their creativity, dare I say their youth and their deep thoughtfulness about stuff. And what I'm finding is that the proper path is actually to be thinking

• 15:11Speaker 00

  about those things kind of simultaneously. Because what's going on is you're trying to figure out, okay, what am I doing with this business? You know, I've got this choice and this choice. And in the mix of that, there are both product market fit questions and power questions. And you don't just say, well, I'm just going to do the product market fit stuff and think about power later. You actually need to start thinking about it. You won't solve it completely at the beginning. You won't know, oh, yeah, I have power for sure, but you should be thinking about it. So persistence then leads you down to those structures. And part of the reason, you know, that it's really cool that you're sort of thinking about this in your interviews and we think about it in our work

• 15:51Speaker 00

  is one thing I've said to you before is that the genotypes of power are simple. They're only seven. My partner, Bill, says that it turns strategy from a essay question into a multiple choice question, although I don't know with chat GPT the difference anymore. But the phenotypes, that is, the exact granular way in which they are articulated and carried forward are complicated. Jenny and I, yeah, and we might struggle for weeks trying to figure out whether something has power or not. I'll give you an example of how the idea of power is so important. So, you know, I'm sort of a sports car nut and I used to drive too fast. And Porsche is a great example here, which is

• 16:36Speaker 00

  Oh, yes. Think of that. The nine eleven, first one came out in 1964, 60 years ago. Porsche wasn't sort of a sports car leader of the world at the time by any means. And so what that enabled Porsche to do, which I don't think was conscious exactly, but sort of spun out in an evolutionary way over time, was that they took away the design element as part of the mix in what wins over sports car enthusiasts. So if you looked at a nine eleven in 1964 and a nine eleven today,

• 17:22Speaker 00

  They kind of look the same. Yeah. You know? And so what did that allow Porsche to do? It allowed to just constantly optimize the best performance features in the context of people would pay for that, you know, handling, acceleration, interior ergonomics, and the technology frontier was changing fairly rapidly. Today, I'm just astonished at the performance you can get from a small scale Honda that'll go 155 miles an hour, you know, faster than a Jaguar XKE, right back in my day.

• 18:03Speaker 00

  And then there but all kinds of parallel developments and other aspects, brakes, sound edd and everything else. And so they could constantly upgrade each generation, not having to think about the design aspect to it, but hit the performance envelope. And people would pay for that. You needed all those things, right? And consequently, they end up with this incredibly durable business model, by far the most profitable automobile maker and devoted fans and great cars.

• 18:35Ben Gilbert?

  Are you saying the fact that they abstracted away the design and they fixed the design meant that it sort of wasn't a hits driven business? It wasn't do people like this design or not?

• 18:47Speaker 00

  Exactly. God, why are you interviewing me?

• 18:51Ben Gilbert?

  Well, you do the hard part, you know? I just get to synthesize.

• 18:55Speaker 00

  So, yes, and then all of these elements like getting the PDK transmission just right, those are fixed cost investments. And if they can spread that over a larger number of automobiles, it's lower cost. So how many times have you seen sports cars that were quite interesting? And then they just couldn't keep upgrading them to meet the grade? I mean, think of the Toyota 2000 or an early version of Alfa Romeo or something.

• 19:24Ben Gilbert?

  And to your point, it's not just did people like them enough? It's could they predict that enough people would like them to? Invest in the necessary things they needed to invest in. And if they couldn't be certain or didn't have the chutzpah to say, there's going to sell a million of these things, then you can't make the investments you need to.

• 19:41Speaker 00

  Right. And so Porsche was the one that just kept being right on that performance envelope. Because they were able to do all these investments and it's a phenomenal business model.

• 19:53Ben Gilbert?

  All right, let's kick it over to Chen Yi. Anything to add, Chen Yi, before we move to transforming?

• 19:57Speaker 03

  I guess I'll just add on to the perspective of a student of the seven powers framework, not the creator of that. So one thing that struck me as the most useful way to apply the power framework is really as a cognitive leverage. So I think Ben, you mentioned, it doesn't really tell you what's the next thing you should build or what product is going to hit the market. But it kind of tells you what's the right strategy question to focus on. I think the way I put it is what is not important is as important as what's important. Naturally, you know, as founder and operators, you will spend 90, 95% of time on operational excellence. It's so important. You have the right team, the right culture, the right execution. But there's 5% of time that you may spend on real important strategy questions.

• 20:42Speaker 03

  And those are what determines the eventual margin structure of the business, the competitiveness of the business. And what power structure can tell you is what is that 5%? Out of all the things you're thinking about, what really makes the real strategic importance that you spend all the time thinking about? That's one way I think this would be the most useful, maybe for a lot of members in your audience. And the other comment I'd have is now that I've kind of had the chance to work on the theory myself, it's actually amazing how it's not done yet. Now, I've been in Hamilton's class, you know, seven, eight years ago at Stanford. Now, I've been working with him for the past couple of years. And, you know, I used to think, oh, it's all in the book, right? It's just there. There are seven of them and it's all described.

• 21:26Speaker 03

  But then, as we dig into it, things that we don't know come up. You know, we talked about platform last year and we're going to talk about transforming now. It's about sort of the dynamics part of power and maybe even extend into corporate strategy, not just business strategy. So this kind of life within the theory is actually really exciting and fun to explore.

• 21:47Ben Gilbert?

  Ooh, I know we're going to get into this in transforming. Can you define the difference between corporate and business strategy?

• 21:53Speaker 03

  I'll kick this one to you, Hamilton.

• 21:56Ben Gilbert?

  Thanks a lot.

• 21:58Speaker 00

  Business strategy is how to find power, if you will, in what you would think of as a single defensible entity. And corporate strategy is how you think about strategy in a multi-business unit corporation. And the central problem of corporate strategy is why is one plus one greater than two? In other words, is there any reason from a value point of view for two separate businesses to be under the same roof? And there have been a variety of efforts in that. If you go back in the days of GE,

• 22:39Speaker 00

  wildly diversified companies, there is a theory for a while that that was really a good thing, that you get sort of these diversification benefits. Turned out not to be true. And so it's really that question of why is it that if you're in one thing, it makes sense or doesn't make sense to be in another thing? And so, again, think of Amazon, AWS. Why is that interesting? And the static part is one plus one is greater than two. The dynamic part, and that's what our transforming discussion is about, is what is it about the business that you currently have that is somehow useful in doing something else?

• 23:24Speaker 00

  So you guys did the all wonderful episode on AWS, demythologizing. But Amazon did have capabilities that made it not completely alien territory.

• 23:37Ben Gilbert?

  Well, let's get into it then.

• 23:39Speaker 00

  So I'll give you a quick intro to transforming, kind of why we think it's interesting. And then Cheney and I can sort of pull it apart a bit and you can ask questions. So there are really three reasons that we think about this. The first is that if you're interested in creating businesses, it's important. And by important, I can give you a little data on that. So I did a study once of the S and P 100, largest market cap companies in the world, and looked at if you pulled apart their value and looked where their profits came from. And you asked the question, what share of their profits came from businesses that

• 24:24Speaker 00

  wasn't their original business? What would you think if you were asked that?

• 24:28Ben Gilbert?

  Can you help us with a year of when you looked at this?

• 24:31Speaker 00

  I did it just prior to the financial crisis. So it was 2007.

• 24:36Ben Gilbert?

  Hmm. David, what was your guess?

• 24:38David Rosenthal?

  My guess was 80%. Knowing that timeframe, I'd maybe dial it down a little bit to 70-ish percent.

• 24:45Ben Gilbert?

  I think it's low because I'm thinking, you know, banks, oil companies, like the largest companies in the world to that point weren't technology companies. And I have to imagine that those are more single business line statics, still drafting off their original innovation companies. But Hamilton wouldn't be asking this question if it were a boring answer.

• 25:04Speaker 00

  I don't know if you consider the answer boring, but it turned out to be about 50%.

• 25:08Ben Gilbert?

  Huh.

• 25:09Speaker 00

  So in the tech world, which you guys intersect more, you know, you can think of all the examples. We talked about AWS as an example, the leadoff example in my book of Intel getting into CPUs.

• 25:22Ben Gilbert?

  Yeah.

• 25:22Speaker 00

  That's transforming, right? They're in memories.

• 25:25David Rosenthal?

  Certainly the lion's share of Apple's revenue is not.

• 25:28Speaker 00

  Right. The iPhone, they were not in that business before. Google into Android, Microsoft into operating systems and applications. They were originally a language company. But as both of you said, sometimes not. Microsoft at Harvard started right out of the gate with Facebook, you know, and so 50% is a big number.

• 25:48Ben Gilbert?

  Yeah, half of all corporate profits of the largest companies in America came from something other than their original innovation.

• 25:54Speaker 00

  Right. So that sort of flags you. And so it's important as one. The second is that it's hard to get right. It's a difficult area. There are reasons that have to do with motivation and there are reasons that have to do with understanding. And Chen Yi will talk about some of the common business nostrums that sort of fall apart in this. On the motivation side, I'll just mention that from a founder point of view, they just founded something that works. And so They're accustomed to that success. And so sometimes they may not appreciate all the idiosyncratic, uncontrolled elements that went into that success.

• 26:38Speaker 00

  And they're very creative and they want to just move forward. And so they're inclined to do that. And that's a great motive force. I love that. That's the lifeblood of an economy, but it also means that you can sometimes get into stuff that you really don't know how to do it.

• 26:52Ben Gilbert?

  Especially for first time founders, if it works out of the gate, then you have no idea to what to attribute the success. It could be skill, it could be luck. Of course, it is some combination of it, but you have no idea the percentage that's skill and the percentage that luck. And you say, well, it worked. I will just repeat the exact same process again, and surely I will create success again. And that is almost assuredly not the case.

• 27:14David Rosenthal?

  I have several companies in my mind that thought that and definitely did not happen.

• 27:18Speaker 00

  Right. And then on the people that often sit on their boards or finance them, there's also a dissonance, which is that if you think of the VC community, the business model in VCs is you find really interesting things to invest in. And then hopefully they go up in value. And then there's an exit, which you profit from that increase in value, which is to this wonderful engine. If you think about what drives the US economy, you know, it's just phenomenal. But in the early stages of how people think about value, there isn't yet this track record of persistence because people are often, for example, spending a lot to acquire customers.

• 28:02Speaker 00

  And so profitability may not be evident yet and the fundamental economics haven't really asserted themselves. And so the only thing left is kind of how the top line is doing, you know? So are you growing like crazy? And so when you hear VCs sometimes complain that people waited too long to IPO, what that message really means is that all of a sudden people's perception of the company changed from the top line to the bottom line and they missed the window. What that says is that that investor community is focused on top line growth, as it should be, because it's the best marker available, but it doesn't tell you much about power. And so it's hard to do. And then the third thing, which of course you would expect from us, is that actually

• 28:47Speaker 00

  understanding power tells you some interesting stuff about transforming. So three things, it's important, it's hard to get right, and power matters.

• 28:57Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 29:11David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 29:25Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 29:35David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 29:52Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 30:08David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 30:25Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 30:34David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 30:45Ben Gilbert?

  Something else just finally occurred to me. I've never thought about it before, but if you are analytical and can figure out and quantify a company's power, then you can assign it a more accurate multiple of profit than anyone else can. Because if you can observe, oh, a company has a 24% Operating margin, many, many years in a row, you can decide, okay, fine. I kind of know what the operating margin is going to be in the future. And I can figure out how I want to value this company. But if it's a new company and it just settled into some steady state of profitability. And you understand the power dynamics, you can be better than other investors at predicting

• 31:28Ben Gilbert?

  the sort of net present value of all the future cash flows of that company. Rather than a very brute force way of doing it of just slapping the same multiple on that everybody else does.

• 31:38Speaker 00

  Yeah, so Ben not only is going to supplant me in writing seven towers, but he's going to take over strategy capital.

• 31:46Speaker 00

  I think that's how fast to 10 you. Yeah. So we're sort of constrained about talking about our investment stuff too much. But basically, the proposition of strategy capital is if you have a differential understanding of long term competitive outcomes in places where that's really hard to figure out, that you can value things more carefully. And so I completely agree. And you properly constrained it. If there's a long history of financials, it's already in the price. So does Walmart have power? Sure.

• 32:14Ben Gilbert?

  Right. My dog can tell you that.

• 32:18Speaker 00

  Right. I'd like to meet your dog sometime. So that's why it's important. And I'm going to just give you a quick take on what I mean by transforming. When I laid this topic out to the two of you, I said that if you're thinking about increasing value in a company, there are sort of two questions. What can I do better and what can I do next? And you spend most of your time on, as you should, on what can I do better? So you think of Amazon developing a better search engine when you look for a product. You've got to think about that, right? And that's most of your time. But then you also think about, okay, well, what can I do next? And that's what transforming is. And that would be Amazon going into AWS.

• 33:00Speaker 00

  And you can imagine thinking about whether to do AWS is a very different exercise than optimizing the search engine. So transforming is sort of a separate topic. Fundamental thing in strategy is think all business definition, which is. What really are the boundaries of your current business?

• 33:22Speaker 03

  So I think actually in our prior email conversation, David, you had the question of how do we go about research something like this? And typically, we start with looking at what others have been talking about. This is exactly where we come across a lot of common narratives of where do you find your next level of growth? We've all heard about, you know, go listen to your customers. There's Amazon's school of like customer obsession that's fairly popular. People will go after TAM expansion, you know, expand geographically, go different segments or, you know, fuller core competence, et cetera. And as we look through this, I think one issue we found is they don't seem to be conclusive about the chance of success of these transforming steps.

• 34:05Speaker 03

  So in other words, you can't say if you do X, you are more likely to succeed, right? Like, for example, there's this whole school of thought around marketing myopia that says you should define your industry definition widely, right? The reason why railroad industry goes into decline is not because people don't have demand for transportation, but because they can't think of themselves as a broad transportation company. They should have moved themselves into cars and trucks and airplanes and even telephone, which are new forms of transportation. And I think this is one of the bestsellers of Harvard Business Review of all time, just speaks to the popularity of it. So the question we will ask is, does companies that follow marketing myopia all tends to be successful?

• 34:49Speaker 03

  You know, does that give us a way to predict success? And we can kind of think of examples on either side, right? Like Disney today is not just a theme park company or animation company. They seem to be a broad entertainment company and they're pretty good at coming up with the next form of entertainment that people will love and want to watch. On the other side, Uber at one point was all in on mobility, right? It was not just about cars, you know, if you still remember the scooters.

• 35:14Speaker 00

  Scooters, buses, yeah.

• 35:16Speaker 03

  Bikes and they were serious about flying cars at one point, right? The Daniel helicopters.

• 35:19Speaker 00

  Oh, that's right. Yeah.

• 35:20Speaker 03

  Right. So that didn't seem to end up that well, even if it ends up in the same mobility definition. So what that means is we can't tell whether following a certain school of thought is definitely going to be leading to success, which means we don't have a theory behind it, right? So that sort of stays our problem is can we say something that's a bit more definitive? You know, a bit more having the predictive power there. And as we thought about it, the real reason why we have this issue is a lot of these popular narratives kind of tell you about economic value, but they don't tell you much about business value. Said in other words, they tell you about value creation, but not value capture.

• 36:04Speaker 03

  And said in other words, we're basically saying product market fit is not power.

• 36:08Speaker 00

  Yeah, coming back to the very first conversation about why we do this in the first place is that the point Chen Yi just made is the fundamental one, which is that creation of economic value is pretty orthogonal to capturing some of that value for yourself, which is to say the creation of company value. So creation of economic value and the creation of company value are different animals. And both are important. And there's a dynamic connection in the sense that if you create economic value, it sort of creates the opportunity to think about capture and so on. But just a single slice in time, they're very different. But that's a fundamental point about all this.

• 36:50Speaker 03

  Yeah, I think that's a good way to put it, which basically means all of the common narratives out there are really useful. They're really useful as idea generators. They tell you where to look for the next product market fit out there. And we think the understanding of power is the missing link here. We have all these ways to come up with options, but how do you assess which one of them is really the best idea? And that's what we set out to give a better structure to.

• 37:14Speaker 00

  Yeah, and so I'll just say how power kind of helps you out in a way. So I mentioned this sort of ethereal concept before, business definition. So it's rather important. So if you think about Uber versus Netflix, where they go next, right? Uber at first, their thought was this was an international business. That means that going into China. Somehow their strength would be transferable into that effort and they could be successful. And Netflix thinking about going international, thinking that if they started streaming in Korea, that that would make a lot of sense.

• 37:53Ben Gilbert?

  And are you considering the international a separate business? Or are you thinking about this as like, should we expand the core business and just address a broader market?

• 38:02Speaker 00

  So that's the question. The key thing there is if you have an established business, is the drivers of power in that extensible to that additional segment you're considering, whether it's geographic or customer or whatever? And because if it is, the risk reward of doing it, the calculation beginning, is so much better because being able to carve out value to yourself is really hard. And if you can build on to something that already does that and it works in that environment, then oh, boy, go there because that's so much easier than doing something really new.

• 38:43Speaker 00

  And so Netflix streaming in Korea, it built on, see saying you can share content across countries, right? It built in the same fixed cost economics of content development and worked. Uber's, if they have a source of power, it has to do with geographical density in a specific area like the Bay Area or something. And going into China, if they're head to head with Didi or something, they don't have any advantage at all. And so it doesn't work.

• 39:14Ben Gilbert?

  Right. They get to bring their technology platform over. So they're amortizing all the engineering, design, product management cost. But they have to go reacquire both sides of the marketplace in full and create that density, which is actually the expensive part of the business.

• 39:27Speaker 00

  Exactly. And if it turned out that the engineering part was 75% of the cost structure, I mean, content for Netflix is 50%, 75%, then it would have been fine, but it's not, just as you said. And so when you're thinking about business definition, in some businesses, international is part of the same business, which is to say it's under the same power umbrella. And in some businesses, it's not. And you have to understand that in terms of what you're doing. And if you're thinking about what's next, if you can go to things that are under your current power umbrella, oh, boy, is that great? If Porsche wants to sell cars in China as opposed to selling them in the US, no brainer.

• 40:10Ben Gilbert?

  Right. Still, all the same unbelievably hard engineering problems that went into creating the car you're selling in the US. You can find a way to distribute that.

• 40:19Speaker 00

  Yeah, and a Chinese competitor would have to go through the same calculation, you know? So the first point of this conversation is that to properly assess transforming directions, the first thing is carefully understanding your current base of power. And then looking at this new segment, whether, as I say, it could be customer, geographic, technology, whatever, product, and seeing whether it relies on that as well. Because then, oh, boy, the world looks rosy. But on the other hand, if you think it does, and it doesn't, it's like Uber in China. I don't know, what did they lose, a billion dollars or something? I don't know what it was.

• 41:04Ben Gilbert?

  Maybe more, once you consider all the divestiture and yeah.

• 41:07Speaker 00

  Yeah, and so they used to be compensated by the shares and I don't know what their shares are worth now. So anyway, so that's the starting point.

• 41:16David Rosenthal?

  It's interesting, right? Like I'm thinking about, we're in the middle of our Nintendo series as we're recording this. And this really is an interesting framework to think about it because on the surface, it could be pretty far flung. I'm thinking about, you know, Nintendo made playing cards with the Japanese organized crime as their primary customer. And then moving from that to video game consoles is a pretty big leap. But you know, what they had originally, that is the same thread through the whole business, is they had an absolutely ironclad lock on their distribution networks, especially. And then over time, through playing cards into toys, into video games, into toy retailers.

• 41:54Speaker 00

  Right, and that's such an interesting case, David, because. Oftentimes, it's that kind of subtlety about locking in a distribution channel, for example, that's sort of kind of invisible, but may actually be the very thing that makes that such an, I mean, if you think of Sony, on the other hand, when they went into game consoles, that was a different business, I'd say, and brutally hard. And it relied on some capabilities. So it shows why the capability thing doesn't get you there. I mean, yeah, some engineering at the time analog was king there and digital was thought of as a backwater, but it was a very difficult, and now it's, of course, the source of their profitability.

• 42:36David Rosenthal?

  Right. But it was a long journey for Sony to get there.

• 42:38Speaker 00

  And like all these things, there were a few principal actors, a few leaders that, had they not been there, it's hard to imagine it ever happening. Some innovative, hard-driving people.

• 42:51Ben Gilbert?

  So Hamilton and Chenyi, can we ask you, what are the most common power types in today's technology-driven world where people might find expansion opportunity inside of their current power umbrella?

• 43:06Speaker 03

  I think particularly for earlier-stage companies, the three most common power types that you will find are scale economies, network economies, and switching costs. Well, it's actually often common that you'll have counter positioning because that's how you tackle your incumbent in a space. But there are a couple other power types that doesn't really come in until sort of the more mature phase of the business. And that's laid out in the book, like process power or brand power. You really need to develop them after years and years of experience, you know, honing in on the core business. So for the benefit of the audience today, we thought it would be more useful to focus on the three types of power, scale, network, and switching cost, which is probably the most common that we'd find out there.

• 43:50Ben Gilbert?

  And are you not including counter positioning here because it's hard to find a second business under a counter positioning umbrella?

• 43:58Speaker 00

  Let me just weigh in there a sec. I agree with her sort of leaving it off because to have power, right, you have to have it versus all potential and existing competitors. The counter positioning one is typically the type of power that you would have against incumbents, but it doesn't work against wannabes because they don't have the same problems. And so the one that you have to think hardest about is versus other companies that are doing it just like you. And so for Boomer, it would be Texas Instruments doing calculators. And so that's why she left it off the list.

• 44:32Speaker 03

  Yeah. So regardless of what's the core power prospect, I'm calling it prospect because this power is a pretty hard bar to clear, but even if you're still in the make for you and you think this is going to be the mechanism that protects you from competition in long run, the first step is always to get a really clear understanding of what that core business power prospect looks like. So back to your example of Uber, if the core power prospect of Uber is actually scale economies, which says the technology framework of doing the matching automatically is so hard and requires so much cost to build, then international expansion would have been totally irrational, right? Because you're just spreading that fixed cost over more geographies and you're getting a head start

• 45:13Speaker 03

  in every single place you have. But the truth is, it's not. The majority of cost of that business actually lies in acquiring and maintaining their customers, which means if anything, the route you should really try to get to is network economies, if you have one. And the scope of that network defines each market is actually heavily bounded geographically. And so every new country, even new city you go into is a complete new business and have to start from scratch. So that's just an example of getting a definitive answer or confident answer about where core business power looks like gives you a very different place to look on where to transform or where to take it to the next step for your business.

• 45:53Ben Gilbert?

  So it's almost like, okay, so I'm here in Seattle. If I was operating an Uber-like service, I have this power, which is all the drivers and all the riders or a high density of that. That means nothing where David is in San Francisco. So instead of launching Uber in San Francisco, maybe I should try and figure out other things to leverage my network for here in Seattle, because that's the place where I have the durable competitive advantage versus others.

• 46:16Speaker 00

  So Uber Eats, right?

• 46:17Ben Gilbert?

  Right.

• 46:18Speaker 03

  So I think the jurors throw out whether ride sharing and food delivery belongs to the same business. Maybe they do.

• 46:24Speaker 00

  But it's more plausible than different geographies.

• 46:27Ben Gilbert?

  This is one of these things where it seems obvious on the surface and then we start to dig in, you're like, oh, wait, maybe it's not as overlapping of a network as I would have thought.

• 46:34Speaker 00

  Right. That's the question.

• 46:35Ben Gilbert?

  Right. The drivers for food delivery are a overlapping, but not that overlapping set of drivers for rideshare. And the set of consumers is obviously different as well, which you can see in the corporate action they took to ship a separate app called Uber Eats rather than bundling into one app. So you actually have like two overlapping, two-sided networks, but not a fully overlapping on either side of the network.

• 47:00Speaker 00

  Ben, that's such a great example because it speaks to the point that of the complication of the phenotypes, that until you peel back the covers, it just sounds, oh, yeah, Uber Eats and ours sounds all the same. But when you start peeling it back, it may not be. So what that says is you have to have quite a lot of nuance in your understanding of whether you have power to begin with. And of course, for Uber, it gets into the nature of platforms and exclusiveness of the sets that occupy either side of the platform and whether they overlap and, you know, all that kind of stuff. And so without that nuance, you just, you miss it.

• 47:40Ben Gilbert?

  Yeah. One other network economy is one that I'm curious to get your take on. I see in your notes here is Microsoft versus Slack. Can you sort of walk through the Microsoft decision to enter the market of whatever Slack's product is, it's quite hard to define, async chat, work, communication with Teams. Why or why not? Was that an interesting entrance and use of their power umbrella?

• 48:03Speaker 03

  So the interesting thing here is we can also think about Microsoft as a platform, right? You operate an operating system where on the two sides you have users and also you have applications. Now, the interesting concept here is the users of Microsoft's platform has a really high cost of affiliation, right? It's not just on the hardware side, you buy a physical machine, but also it's typically an enterprise-wide adoption. There's a procurement process attached to it. There's the distribution channels that, you know, similar to how Nintendo one worked. And because of that, Microsoft's network scope basically extends to whatever demand my user side would have without incurring more cost on their end.

• 48:45Speaker 03

  Without, they don't have to do another procurement cycle maybe, or did not have to buy another hardware for. So that naturally extends to basically maybe all of productivity software. And that's how you see Microsoft Teams create at least a competitive hassle for Slack. I think we all have experienced that Slack is a really, really good product, but good products don't always win because when there is competitive advantage from an incumbent, in the case of Microsoft, they basically have a network that can extend into the product Slack is operating on, they create issues, you know, competitively.

• 49:21Speaker 00

  So where we're heading in this conversation is we're saying transforming is a worthwhile topic. And then we're saying that a starting point is understanding the power of your current business because if you can build off of that, it creates a wildly preferable risk-return prospect for something you're getting into. And so that then takes us to the next topic, which is what if you can't build on your current thing and you need to get into something that doesn't build on your current source of power? And the two of you with all your interviews actually have so much, you know, you have this wealth of information about what goes into people's minds doing that. But if you think about that, what are you into?

• 50:06Speaker 00

  You're basically, you're starting a new business, right?

• 50:10Ben Gilbert?

  Right. Congratulations. You don't have to file as a Delaware C corp. And you probably have some people you've already hired that can work on it. But what other assets are you repurposing?

• 50:19Speaker 00

  Right, exactly. And so remember that thing I said about the S and P 100? If you look at what they went into that generated a lot of value and ask the question, could you generalize it all about that? I'll create some definitions here a little bit, sort of three categories. If you think of, does it satisfy the same needs or does it use the same skills? Those are the two dimensions, right? Because I have a consulting background and the whole world is always two dimensional, right? And if it has neither the same skills nor the same need, I'd just call that pure diversification. And rarely does that work. That's a very high risk proposition. You're basically creating new business, something you don't know how to do at all.

• 51:04Ben Gilbert?

  And when you say skills and need, that's the skills of my company and the need of my customers?

• 51:11Speaker 00

  The skills of your company. So what your engineers know how to do, what your salespeople know how to do, all those sorts of things.

• 51:18David Rosenthal?

  So like in that case, you'd be better off either having people who are entrepreneurial within your company, like leave and start a new company and spin it off, or invest your treasury in other companies.

• 51:28Speaker 00

  And as a big company, you have all the agency problems of trying to get something off the ground with a lot of bureaucracy and everything else.

• 51:35David Rosenthal?

  Right. There's some advantages, but there's more disadvantages.

• 51:38Speaker 00

  Right. There's probably more disadvantages than advantages. And data supports that, that unrelated diversification is typically not a great thing to do.

• 51:47Ben Gilbert?

  So the lower left of this two by two matrix is I neither have the team that is great at creating this next new thing, nor do I have the customers that want this next new thing currently.

• 51:58Speaker 00

  You got it. Right. And then if you look at the upper left, which is it's the same need, but different set of skills, you can call that reinvention. And sometimes you're forced to do that. But the opportunity set isn't that great, really. It's not like you're opening up the whole world to opportunities. And so those are pretty rare. It does happen. I mean, Netflix into streaming is reinvention. It can happen. It's hard to do. You're usually counter positioned because you've got a whole group of people that wants to do it the old way.

• 52:30Ben Gilbert?

  Right.

• 52:31Speaker 00

  And they have a lot of power in a company typically because they've got the P and L.

• 52:35Ben Gilbert?

  It requires sort of the founder sponsor to go pursue it.

• 52:39Speaker 00

  Yep, that's very insightful. Exactly right. Otherwise, you get swamped by agency problems. And so the different needs, skills sharing, same skills or not same, but shared skills, you can call that category co-action. And that's where all the action is.

• 52:57David Rosenthal?

  Yeah, that's AWS for sure, right?

• 52:59Speaker 00

  Exactly, AWS. Right.

• 53:01Ben Gilbert?

  Wait, so this is the lower right?

• 53:03Speaker 00

  This is kind of the lower middle. It's a bunch of not perfectly shared skills, but you know quite a bit about the stuff you need to do to get in there, but it's a different need. And that accounts, I don't have the numbers in front of me, but I think it's 90% of the value in the S and P 100 of the new stuff came from co-action. And that's saying something that's pretty straightforward.

• 53:29David Rosenthal?

  And I guess there is no top right because that is your current product. Same team, same needs, right?

• 53:34Speaker 00

  Ah, God, you're too fast for me. That's right. Same business. And then the extra credit on this will be why are these axes not quite orthogonal, but I'll leave that to another discussion. So if you think of Sony going into PlayStation, that was not the same as Sony going into cars. It was a different business, but they did have, you know, a lot of stuff. And so that basically says that you want to constrain yourself to areas that sort of meet with your current capabilities. Now, occasionally, there are companies that have capabilities that are so proprietary.

• 54:11Speaker 00

  That actually that aligns with power automatically, but that's very rare. I mean, I'd say like Corning and glass technology, for example. It's such a weird material science, so they could do glass stuff that other people couldn't do.

• 54:26Ben Gilbert?

  Is 3M a good example of this sort of lower right where they know how to make all kinds of interesting stuff, but for completely different customer bases, completely different use cases?

• 54:35Speaker 00

  So my view of 3M is that they're basically a material science company. And material science is weird. It's not fully, or at least it used to be, I'm not so current on it so much, but not fully developed theoretically. There are all kinds of nichey, idiosyncratic aspects to it. And so they were able to invent stuff. So if you think of Post-it notes, right? That was a not so sticky glue, right? And then they didn't know what the hell to do with it. And it went on for years. There is a champion in the thing that just said, no, there's something great here. And they almost missed it.

• 55:19Speaker 00

  It came down to a final marketing trial where they almost didn't follow up on it.

• 55:24David Rosenthal?

  Wow. It is great. I'd never really thought about that. I mean, I know it's a famous story, but objectively it was a really crappy product that they made. And then they turned that crappiness into a feature.

• 55:35Speaker 00

  Well, I'd characterize it a little different. I'd say it was a very interesting technology with no product.

• 55:40Ben Gilbert?

  It's kind of like web three. It's like a computer.

• 55:45Ben Gilbert?

  It's like way slower.

• 55:46David Rosenthal?

  Too soon, Ben, too soon.

• 55:48Speaker 00

  But like, right, right. I love that.

• 55:49Ben Gilbert?

  Maybe we'll find the sticky note, right? Maybe the fact that it's really slow is irrelevant, given it's decentralized.

• 55:55Speaker 00

  Right. Yeah, it's funny. I guess we share a view in that. I don't find myself very popular in that view, but I agree with you. There's all this hand waving about the wonders of decentralization and the world will be a great place and everything. And I'm waiting for the.

• 56:10David Rosenthal?

  We need the sticky note.

• 56:12Speaker 00

  We need the sticky note, right? Anyway, so I think that is just a simple observation, which is that the stuff that's most likely will get you there is a different need, but using some of the skills that you have and nothing very complicated about it. But I think data bears that out.

• 56:30Ben Gilbert?

  I would say a lot of tech companies today have the same set of capabilities. So is it about where you have differential capability versus other companies? Or just, hey, you can repurpose a bunch of your engineers to do something interesting. And sure, everyone else can kind of do it, too.

• 56:46Speaker 00

  So a really interesting question. I mean, way back when, before the idea of core competencies, there's a writer that wrote about, I think, they use the term distinctive competencies, which is exactly what you're getting at. And I would say that that was probably true of Corning and glass technology. But it's rare. And I agree with you that a lot of tech companies have a lot of similar sort of stuff. And if you had a distinctive capability and that that had an application in an area, so it led to a good product, then, oh, boy, that's great. But it's hard. That's not common. And so if you're in this place where you can't build on your current power,

• 57:30Speaker 00

  you just have to realize, as you were saying before, Ben, you're back in invent space. And yeah, you can build on current capabilities, but that's sort of table stakes. You know, you're into that level of risk. And like all those things, it's adaptive. You know, you sort of try stuff and move forward in a positive way.

• 57:50Ben Gilbert?

  And so my little mental waterfall so far, from everything that you've shared with us, is step one, identify the power in your current business and be brutally honest about it.

• 58:00Speaker 00

  Right. Brutally honest and very granular.

• 58:03Ben Gilbert?

  Yes. Step two, figure out if there is a new business to launch or expand into under that particular power umbrella. If so, great, do that. If not, you have to go start a new business. And where you should look for the most fertile ground for that new business is using your existing set of capabilities, but for a different job to be done for customers. Look there and especially, this is almost step four, if you have differential capability versus other companies who could also pursue that same opportunity.

• 58:41Speaker 00

  I love it. Yeah. Did you write that down, Jenny? I think we should remember all that.

• 58:45Speaker 03

  Yeah, I mean, ventures just help us produce theory.

• 58:48Speaker 00

  Right, right, right. Yeah. No, I think you nailed it.

• 58:51Speaker 03

  Yeah. There's one point I want to make. There's a reason why it's sequenced that way. And it may be obvious, but still worth iterating, which is invention is risky. If you have something underneath your existing power umbrella, and that's what Amazon did. They had this distribution logistics. They started with, we all know, books and then CDs and then electronics, et cetera. It's a natural extension that not just leveraged, but also intensifies your existing power. That's way less risky. You know, you start somewhere new, but with a head start compared to anyone that's a competitor. But the movement into Amazon Web Services is invention. And I loved your guy's story on how there's the four different sources of, you know, starting point of Amazon.

• 59:32Speaker 03

  People would love to think it's based on some existing competitive advantage of the business, but it's really not. It's invention. They figured out a new thing that the market wants. But as successful as they are in AWS, they also flopped, you know, Fire Phone, if you still remember that. They also lost billions and billions on Alexa. There's really no track record of a business who can continuously come up with successful invention. And that speaks to the riskiness of that, which is why it's only the point number three or number four on the list. Because if you don't have to go there, don't. But if you do have to go there, co action is the most possible place for success.

• 1:00:10Ben Gilbert?

  Thank God these things are power law distributed, otherwise, to your point, because no one has ever successfully been able to do hit after hit after hit like this. It would be net unprofitable to pursue innovation.

• 1:00:22Speaker 00

  Right. I just want to underline what Jenny's rightfully kind of pulled that out as kind of a key point here is that the risk level of doing something that's under your current power umbrella or not. The difference is gigantic.

• 1:00:42Speaker 00

  So that should be your starting point because it is absolutely gigantic. And I think since we're back into invention, and I am a huge fan of Amazon, the fact that they've been able to do what they do, I would argue that they couldn't have done it if they weren't willing to take the risk and have some failures, right?

• 1:01:03David Rosenthal?

  Absolutely.

• 1:01:04Speaker 00

  And so when Cheney and I talk to companies, we'll often, when we hear it, if they have been successful at transforming, and we talk about future transforming, the narrative that makes us think, oh, boy, this is really, you've really got a problem is, oh, we have a really defined process for innovation here, and there is a 17-step process, and we know exactly who to assign to it, and blah, blah, blah. That's the red flag of all red flags, right? And then there are other in-company things you worry about, sort of screening criteria.

• 1:01:45Speaker 00

  For example, some companies, when they're thinking of doing new stuff, say, well, I won't do it unless it will move the needle corporately, which means the market has to be certain size.

• 1:01:55Ben Gilbert?

  This was Microsoft. I mean, it was like, oh, unless you're going to go create a billion-dollar revenue product, I'm not green-lighting your document.

• 1:02:02Speaker 00

  Right. And usually, if it's already a billion-dollar market, you're too late. But this is just to highlight that invention's really hard. It's hard for a large company to do it. It's hard for individuals to do it. And corporate strategy is asking a question, on the transforming side at least, of if you do it, are there cases in which your current platform are significant benefit to you?

• 1:02:26Ben Gilbert?

  Where would you put the iPhone in this framework?

• 1:02:30Speaker 00

  Oh, iPhone is, and the iPod are straight-up co-action. Similar capabilities, but, I mean, they are computers in sort of a generic sense, right? But the iPhone, in a functional way, it does compete a little bit with a desktop.

• 1:02:45David Rosenthal?

  Yeah, right.

• 1:02:46Ben Gilbert?

  More so than they realized it would.

• 1:02:48David Rosenthal?

  They're kind of like, maybe as high up as you can go, towards the top right of their, sort of like, the existing products of the company, but different on some key dimensions.

• 1:02:59Speaker 00

  Yeah, I mean, I would say that one of the things when you're trying to do business definition, there's the theoretical side is the power shared. And then there's the empirical side is to look at the composition of competitors and see if they're different. And that's suggestive that they're sort of different. And so the competitors for the iPhone are different largely than the competitors for the MacBook Pro.

• 1:03:26Ben Gilbert?

  A good litmus test.

• 1:03:27Speaker 00

  You know, again, it's not perfect, but because sometimes that doesn't develop in exactly economic ways, but it's a pretty good way to look at it.

• 1:03:36Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:03:49David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:04:06Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:04:21David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:04:45Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:05:04David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:05:34Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you. So here's an interesting, you can tell me if it's interesting, an observation on Apple. It's basically always been co-action when they come up with a new multi-billion dollar product line. You've got the iPod, you know, absent going and getting the new type of hard drive, they kind of knew how to build everything about the iPod already.

• 1:06:16Ben Gilbert?

  And once they had the tiny hard drive, then great, all of our engineers know how to build something like this. iPhone, same thing. iPad, same thing. These are new jobs to be done for customers, but they have all the right talent to build them. AirPods, same thing.

• 1:06:31David Rosenthal?

  What?

• 1:06:32Ben Gilbert?

  Maybe this ARVR device, same thing. We'll have to see if it launches here in the next few months. But interestingly, a thing where they didn't have a large amount of the talent in-house is cars. And so they had to go build completely new skills within the company to try to, you know, they've got what, several thousand people working on this car now, still hasn't launched, changed strategy five times. They have no confidence this is going to be a commercial success. It's a new requirement for customers that requires a whole bunch of people that they did not have and capability they did not have. And that kind of speaks to where I think you're going with this framework, that that product has not been successful or even launched.

• 1:07:14Speaker 00

  That's closer to pure diversification, right?

• 1:07:17David Rosenthal?

  Yeah.

• 1:07:17Speaker 00

  So if you think of the horizontal axis, that thing I was talking about, that's a spectrum from zero to 100%. If you're in the car business, if you go from green cars to red cars, you have almost 95% shared skill. Go from luxury cars to compacts, high sharing, so Toyota can do it. Go from cars to tanks, pretty different.

• 1:07:43David Rosenthal?

  Porsche did it, under coercion by the Nazis.

• 1:07:46Speaker 00

  Right, right. It's not impossible, but quite different. And then if you go from cars to refrigerators, it's really different. So yeah, no, I agree with that analysis. But remember to not to forget the importance of the entrepreneur in this. Because they are the locus of inventiveness. And it doesn't happen without them. And this isn't an automatic process or something mechanical. There's individual human creativity involved. And it's especially evident at Apple, but it's really true everywhere for all entrepreneurs. And so that's why Cheney and I have to be fairly modest about what we're doing.

• 1:08:29Speaker 00

  Because what we're really trying to do is to provide pattern recognition for those people. But it doesn't substitute for them. It's just a tool.

• 1:08:38David Rosenthal?

  This is a good lead up, actually, to what I wanted to ask you as we wrap on internal transforming and new business development. Does this framework apply to thinking about acquisitions as well for companies? Because I would imagine companies that are starting to think about transforming are also at a stage where they could be contemplating fairly large or transformative M and A. Is that different? Or should you think about that with the same rubric?

• 1:09:04Speaker 00

  Well, it's very related. If you're acquiring a company, the primary question you have to ask yourself is, why is this worth more to me than to the seller? Because there will always be an information asymmetry. The seller will always know more about the asset than you will. There's a ton of financial analysis work on this and you can't get it perfectly. But basically they look at the stock price before and after acquisition and all this stuff. And if you distill all that, what it basically says is, you know, the acquirers kind of break even or whatever, and the seller does very well.

• 1:09:41Speaker 00

  And the fact that they figured that out for a large segment of business was genius. And so that then question of what do you bring? You can imagine how that touches on this subject of business definition and so on. And that's why antitrust authorities get so upset about it. If you horizontally acquire in something with scale economies, that just makes you advantage that much more. And so people get upset about it and people would love to do it. But you know, Hart, Scott, Rodina will let you get away with it, right? And rightfully so. But you have to be very, very disciplined because often what happens if you're inside

• 1:10:24Speaker 00

  a large company and facing these decisions, and I've been involved in many of them. What happens is the argument that's often made to advance that is, oh, well, we don't have to have the same number of accountants or we can kind of reduce their sort of these cost reduction personnel overlap thing. Never works because they're diseconomies of being in a large organization as well as economies. And they're sort of a wash is a good assumption about it. And how much money are you really going to save? Right. And so that analysis doesn't get you there. You need something more fundamental and usually it's related to power or something like that.

• 1:11:05Ben Gilbert?

  One of David and my learnings from doing our episode, the acquired top 10, the best acquisitions of all time was there are exceptions, but most of the time something is a wildly successful acquisition is because you're able to find more revenue rather than find cost savings because cost savings are capped, whereas new revenue has unlimited upside.

• 1:11:27Speaker 00

  Well, I'll add something to that, which is that the cost of that revenue is favorable.

• 1:11:32Ben Gilbert?

  Right.

• 1:11:33Speaker 00

  So think of Disney. So think of getting Lucas and Cameron stuff and-

• 1:11:39Ben Gilbert?

  Marvel. Wow. Marvel is incredible.

• 1:11:43Speaker 00

  Yeah, Hiber created a huge amount of corporate value by doing those things and Pixar. And that had to do with him taking franchises, like LVMH was taking powerful brands that weren't fully exploited and figuring out how to economically exploit them, right? And Disney was taking branded entertainment that was powerful and being able to fully exploit it. And so it answered the question, why is this worth more to me? So you could take Star Wars stuff, which you sort of had the feeling George Lucas kind of wasn't so interesting to sort of exploit it. He was kind of a creative genius, right? And yet Disney could take it and run with it.

• 1:12:24Speaker 00

  And so I think it wasn't that you bought revenue that already existed. It was that you were able to exploit that.

• 1:12:32David Rosenthal?

  I'm curious if you have any thoughts on, or if there's more nuance to what I always think of as kind of like the highest likelihood of success acquisitions are enterprise software acquisitions, where a product is bought by one of the top enterprise software, you know, sales forces. Call it Microsoft or Oracle or Salesforce or the like. And then they plug it into the Salesforce. Is that similar to what we're talking about here? Like, it seems very clear to me why XYZ good product that is sold in the same manner that Salesforce sells all of their products would be way more valuable to Salesforce than to its current owners.

• 1:13:13Ben Gilbert?

  And David, real quick, I'll caveat that with like maybe highest likelihood to succeed, but not highest magnitude of success.

• 1:13:19David Rosenthal?

  Right, yes. And I think that's what's interesting about it.

• 1:13:21Speaker 00

  Right. So examples like that, they plug completely into the power structure of the current business. So, you know, high switching costs stuff, right? And so that they can deploy it to all their customers and get the same economics by switching costs. I understand. Do you want to add to that?

• 1:13:39Speaker 03

  Yeah, it actually occurs to me that there might be exactly tied to switching costs. There might be another rationale for buying, which is building takes longer than buying and timing matters, particularly for companies with switching costs. Now, the interesting about switching costs going back to the power itself is it's non-exclusive, right? So your competitors, if they're a functional equivalent, can also have switching cost. Now, if you go down this logic line, it creates the possibility of companies having switching costs but no profits. And the way it happens is if a competitor was able to build the same product, roughly the same product, and they fully realize this is the lifetime value of the customer, should I acquire them, then it's rational to invest up to all of those value in the

• 1:14:22Speaker 03

  acquisition phase, you know, be it discounting, partner incentives, marketing campaigns, whatever it is. It's rational to spend up to all of that lifetime value to try to win that customer. And then what you end up with is companies with switching costs but no profits.

• 1:14:36Speaker 00

  Right. And so that's why if you have switching costs, the key strategic challenge is to acquire customers when the cost of a customer does not fully arbitrage out the profit stream that you would expect from them.

• 1:14:50David Rosenthal?

  Right. Which is so funny. I'm thinking, like we talked about earlier, of Slack and Salesforce and Microsoft and Teams right now. I haven't studied either of the businesses, but I would expect that despite all the ballyhoo about all of it, neither Slack's for Salesforce nor, well, maybe Teams for Microsoft is, but are not like huge transformative incremental drivers of profits for those two parent companies.

• 1:15:13Speaker 00

  So I think sort of a non-obvious point of all this is that if you're thinking of doing something new, getting into stuff, that understanding business definition is critical, which is to say, into what areas does your current power umbrella extend? You gotta understand that. Then the next one is the point that Cheney made, which is that expansion into areas where that umbrella extends is radically more attractive than starting something utterly new.

• 1:15:45Speaker 03

  Oh, and I will add to that, that it's not a good to have. If you understand power umbrella is bigger than what you currently offer and you ignore it, you actually are creating competitive openings for somebody else to take on.

• 1:15:56Speaker 00

  Oh, that's a really important point. Absolutely.

• 1:15:59David Rosenthal?

  You're failing if you don't exploit it.

• 1:16:01Speaker 00

  Right, because you can assume that eventually somebody else will, and that may completely ruin your competitive position, for example, if it's based on scale. So, point one, go to business definition, think very hard about where your power umbrella is. Two, that if it does extend into an area, you're considering to go there because it's really attractive. And then the third one is that if you don't have anything there and you still want to do something new, co-action's the name of the game, but understand that you're now into invention of a new business. And with all the things around it, risk adaptation, you know, everything, and entrepreneurs matter. So Jenny, that was such an important point about how if you miss a business definition,

• 1:16:46Speaker 00

  I'm going to ask you for an example. Can you think of a good example of companies that didn't understand the full extent of their business and got taken out as a result of it?

• 1:16:59Speaker 03

  Well, I'll throw something out. It's tough because you tend to have survivorship bias. You only remember those companies that made it.

• 1:17:05Speaker 00

  Right, right. Yeah, who was that? Balmar never heard of him, right?

• 1:17:09Ben Gilbert?

  Or the handful of very few colossal failures that were so unbelievable that, you know, they're stuck in all of our psyche. For example, Blockbuster. It could be the case that Blockbuster failed where they had the distribution network and the customer relationships. So there was a source of power there and they failed to exploit it in using that to launch their own streaming service, which mostly is because of boardroom blunders, but a failure nonetheless.

• 1:17:34Speaker 00

  My take of Blockbuster is if they'd done a red envelope business a year earlier, Netflix wouldn't have survived.

• 1:17:41Speaker 03

  Maybe another example is the credit card industry and how it evolved.

• 1:17:44Speaker 00

  Oh, I love that. Right.

• 1:17:46Speaker 03

  It started basically as branded charge cards for a particular retail store or a gas station, and then turned into Diners Club, which is a card for many restaurants. And then very quickly it turned into Universal Card. It's a card for basically everything.

• 1:18:00Ben Gilbert?

  And they were basically extending your credit, right? They were saying, this works here and we'll give you some credit at our store. And then over time, they would start saying, we'll spot you for that restaurant too. We have a relationship with that restaurant.

• 1:18:10Speaker 00

  Right. So do either of you have Diners Club's cards?

• 1:18:13Ben Gilbert?

  I do not.

• 1:18:14David Rosenthal?

  No.

• 1:18:15Speaker 00

  Right. And so they missed it.

• 1:18:17David Rosenthal?

  Yep.

• 1:18:17Speaker 00

  I mean, it's a great example. They didn't understand that it was, there was actually a platform where you want to cover as many purchase types as possible and it shouldn't be constrained. And so they missed the business definition and Visa is one of the highest margin businesses in the world right now, right?

• 1:18:36Speaker 03

  Yeah, Visa's 50% margin is astonishing.

• 1:18:38David Rosenthal?

  Wow.

• 1:18:39Ben Gilbert?

  Wow. We gotta do Visa at some point. I can't believe Visa didn't IPO until like the 2000s.

• 1:18:46Speaker 00

  That is an interesting actual. Were they owned by banks?

• 1:18:50Ben Gilbert?

  I think it was a B of A, yes, founded in 1958 by Bank of America as Bank Americard.

• 1:18:57David Rosenthal?

  Yeah, it was a consortium of banks and that's right, I remember all this now. The IPO happened right in the middle of the great financial crisis. It was March 2008. Talk about bad timing, but didn't matter.

• 1:19:08Speaker 00

  Probably a good time to buy the stock.

• 1:19:10David Rosenthal?

  Yeah.

• 1:19:11Ben Gilbert?

  Seriously. All right, Hamilton and Chen Yu, while we have you here, we got to ask you something that David and I were debating on our Nintendo episode, specifically in the 1980s. So you've got a console maker, Nintendo. They have a whole bunch of customers that are the people who are buying the consoles and playing the games on them. And they have a mix of first and third party titles. So they make Mario as a first party title and they have some third party developers making games for them.

• 1:19:38David Rosenthal?

  Final Fantasy and Dragon Quest and Castlevania.

• 1:19:41Ben Gilbert?

  And of course, the reason that those third party publishers are making the games for them is because they have 95% market share of people buying video game consoles. And David and I were really going back and forth and we were like, is it a scale economy? Because they can amortize the cost of game creation across so many consumers? Or is it a classic two-sided network effect or a network economy power?

• 1:20:04Speaker 03

  I was thinking about this this morning. It's fun. So I think it's both. And the reason why it's both is because you can think of Nintendo as a platform that vertically integrated into the production side. Basically, all the first-party content is a vertical integration. And that's why they would exhibit economic structure that you would typically find in producers, which is economies of scale. But at the same time, the third-party transactions are a nature of network economies. Now, some question we may have to analyze there is, is this platform really stable? Which means, is there really a high cost of being attached to this platform? Can you multi-home, et cetera? We have to go into that.

• 1:20:46David Rosenthal?

  Well, in the 80s, there were no other viable platforms.

• 1:20:49Speaker 03

  Right, so maybe they're just the one. So that's why you would observe economic structure of both scale economies and network economies. Now, there's a deeper question there, which I don't even have an answer to, is, is one of them the cause and the other the effect? Or are both of them causes for power?

• 1:21:06Speaker 00

  Right, I love the answer. And I think she's right. I mean, when we look at platform things, there is the business of running the platform. So think of, for example, the fixed cost in Uber of their modeling and all that kind of stuff. And then there's the network economy aspects of a two-sided platform of people, you know, and so on. And you could have power in either one of those. But if it turns out that the cost structure is not, there isn't a huge lump of fixed cost, then it doesn't matter much. But I think, Jenny, you got it right.

• 1:21:39David Rosenthal?

  Okay, well, we feel vindicated because that's kind of the conclusion we came to on the episode, too, of it's both, and they're deeply intertwined.

• 1:21:47Speaker 03

  I'll give you an example of intertwined real life, which is, we all know Amazon in retail has gigantic scale advantage in the infrastructure, right? Just all the warehouse and distribution centers they've built. But at the same time, you observe, you know, what you will call flywheels on the retail, right? The more buyers, more sellers, and the loop goes on. And this is what I call the mixing of reality between cause and effect. Because without a really strong distribution infrastructure, which gives them the cost advantage and faster delivery and prime and all of those benefits. There really isn't anything that makes their marketplace sticky among either side. So the so-called network effect you observe is actually an effect of the power in scale

• 1:22:32Speaker 03

  of the infrastructure underneath, but you would just observe economic structure of both because platform just kind of makes them all together.

• 1:22:38Speaker 00

  Yeah, and this isn't sort of a pointy-headed kind of issue because it gets back to if you find the thing that's cause rather than effect, that's the thing that you got to defend, right? And my intuition about this, and I don't know if it's right, is that you have to introduce time as a variable in this to correctly understand the problem. But I think Jenny and I are involved in this deep debate right now about sort of the boundaries and relationship between scale economies and network economies. If you want to get even more confused, just remember that scale economy typically is defined as a situation which is scale increases cost per unit goes down. That's often true of network economies, right?

• 1:23:21Speaker 00

  But the structural economic conditions that create it are quite different. And understanding those, if you're a business operator, is really important because then you're less likely to get taken out by your better.

• 1:23:33Ben Gilbert?

  Well, I think this is a great place to leave it. Hamilton, Chen Yi, thank you so much for part three. Can't wait for part four in a few years. I don't know, is this going to be a book? Is Transforming, are you guys going to publish this?

• 1:23:43Speaker 00

  Well, what we're talking about right now is there are a variety of topics that are extremely difficult phenotypes, if you will, to tease out and delayer. And we seem to have enough of those that actually we probably could write a book about it. And so it's a topic of conversation.

• 1:24:07Ben Gilbert?

  Great.

• 1:24:07David Rosenthal?

  At a minimum, you all should have a newsletter. There should be a Strategy Capital newsletter. You'd break up there with Ben Thompson.

• 1:24:14Ben Gilbert?

  Even if it's only like quarterly or something.

• 1:24:16Speaker 00

  Yeah, yeah, we've thought about certain white papers and this and that. So I'm pretty lazy, Jenny probably could do it.

• 1:24:23David Rosenthal?

  Well, this is the problem. You need a bundle of skills to be like a Ben Thompson is you need to be both a great strategy thinker, which you both are, and you need to be a great writer, which you are. Seven Powers is really excellently written, and you need to love writing and want to do it every day or every period, which I'm not sure that you do.

• 1:24:46Ben Gilbert?

  That's the part where David and I fall down, too. People keep saying, oh, you should turn a choir into a book, or you should turn these into blog posts. And David and I look at each other and we're like, it takes us hours to write.

• 1:24:56David Rosenthal?

  That sounds like hell.

• 1:24:58Speaker 00

  I'd say my passion, and I think probably Chinese for the lines for this, too, is getting the theory right. It's very satisfying and extremely hard to sort of go through and figure out, you know, how this kind of all fits together. And of course, that's how you get to simple, but not simplistic. That's the only way you get to simple, but not simplistic. And so that's kind of the satisfying part. But I don't know, the idea of writing another book scares the hell out of me.

• 1:25:27Speaker 03

  Yeah, it doesn't help when the theory is never done. You know, like, it's funny, I think, David, you mentioned last time we talked about platforms, it doesn't feel completed. Like, the truth is, it will never be completed, and it's always in the work. I think nowadays we've got a lot clearer about it than a year ago, but it's always in the make. We'll think about something else, and it comes back to a platform like, oh, that's the missing piece. And realize, it's actually vertical integration. We were confused about the whole skill network for a very long time. And then like, oh, that's what's missing. And the communication strategy is always a difficult piece as well. I bet the two of you spend a lot of time on each company that you do an episode on, and it's things like that. And whenever you want to do an example, you're like, is this really true? Then you have to go dig it all back

• 1:26:10Speaker 03

  and be like, am I just misperceiving what this really is about?

• 1:26:14Speaker 00

  Yeah. How did you delayer AWS?

• 1:26:17Ben Gilbert?

  That one, we actually talked to a lot of people who were around it at the moment of conception or theoretical conception over a variety of years. And there has been sort of canonical sources. So, you know, we read Brad Stone's book and we know Brad. So we asked him, you know, who did you talk to to kind of piece this together? And we had our own folks that we knew. So there was a little bit of like actual first party knowledge there. But David and I had this a little bit of an aha moment, a little bit of a sigh of relief when we were like, oh, we're not going to figure out what the one story was. So we actually can create an episode out of there's a bunch of stories and like, we leave it to you, listener.

• 1:26:53David Rosenthal?

  And that that's probably the right answer is there is no one story, which being a third party observer, to the extent that our version of what we told is true or closer to the truth than others, no person who was personally vested and interested would be able to have that perspective.

• 1:27:09Speaker 00

  Yeah. So and channeling Kurosalwa, right?

• 1:27:13Ben Gilbert?

  Yes, exactly.

• 1:27:14Speaker 00

  Yes.

• 1:27:15Ben Gilbert?

  All right. Well, that's a great place to leave it. Hamilton, Chen Yi, thank you so much.

• 1:27:19David Rosenthal?

  Thank you both.

• 1:27:19Speaker 00

  Great. Okay. Our pleasure.

• 1:27:21Speaker 03

  Thank you.

• 1:27:23David Rosenthal?

  All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 1:27:29Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:27:40David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:28:00Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:28:13David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:28:24Ben Gilbert?

  All right, listeners, thank you. Thanks to Hamilton and Chen Yi for joining us. Very clarifying discussion, I felt, David.

• 1:28:31David Rosenthal?

  Totally. I mean, they really are too modest to say on the episode, but they are the very best people to do what they do because they sit at the intersection of academia, corporate strategy. Hamilton worked for Bain and Strategy Consulting for many years, and active investing. And they're working with founders every day, getting their hands dirty. They truly are the best.

• 1:28:51Ben Gilbert?

  Well, listeners, we'd love to go deeper with you. You can become an acquired LP to come back into the acquired kitchen. David, are you liking that language? I've been...

• 1:29:00David Rosenthal?

  I think of Steph Curry every time you say that, cooking in the kitchen.

• 1:29:03Ben Gilbert?

  Good, good. Well, listeners, we have bimonthly Zoom calls with our LPs, and we just announced that we are asking LPs to help us pick future episodes. So LPs, watch your email for that. And listeners, you can join at acquired.fm/lp. You should subscribe to our second show, ACQ 2, in any podcast player for expert interviews with founders and investors. Come join the Slack. There's now over 15,000 smart, thoughtful members of the acquired community who have joined at acquired.fm/slash/Slack. And for the other 95% of you who listen to this show and haven't joined, we would love to chat with you. All right, listeners, we will see you next time.

• 1:29:42David Rosenthal?

  We'll see you next time.