Eugene Wei – Tech, Media, and Culture - [Invest Like the Best, EP.118]

My guest this week, Eugene Wei, has one of the most interesting backgrounds of anyone I’ve had on the podcast. He worked at Amazon early in its life, was the head of product at Hulu and Flipboard, and head of video and Oculus. Our conversation is about the intersection of technology, media, culture. We discuss Eugene’s concept of invisible asymptotes: why growth slows down (for both companies and people) and how some can burst through. I’d list more of the topics, but we covered so much that you should just listen. Finally, I’ll say that after spending a day with Eugene (including a wildly interesting dinner with Eugene, past podcast guest Sam Hinkie, and future podcast guest Kevin Kwok) that he is the type of uniquely interesting and kind person I am always searching for and one that I wish I could bet on somehow. If you know more people like this, reach out and suggest them for this podcast. Now, enjoy our conversation. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag Show Notes 1:38 - (First Question) – Idea of cuisine and empire 1:52 – Cuisine and Empire: Cooking in World History 4:20 – Key takeaways from the Defiant Ones Documentary 8;25 – Being convinced to buy a sports coat 11:10 – The concept of invisible asymptote 17:43 – How the medium shapes the messaging and the impact of cameras everywhere on society 17:48– Invisible asymptotes 17:56 – Selfies as a second language 22:57 – Proof of work in building a social network 32:51 – Magnification of inequalities in digital networks 34:01 – The Lessons of History 36:47 – His thoughts on the media industry’s impact on society as a whole 39:42 – His time at Hulu 44:48 – Places where video could replace text 47:30 – The need for media for any business looking to grow 49:35 – Amusing Ourselves to Death: Public Discourse in the Age of Show Business 53:08 – Personal asymptotes 57:19 - Habit building and goal setting 1:00:29 – Travel recommendations 1:03:24 – Movie recommendations 1:08:16 – Product recommendations and what makes them indispensable 1:10:44 – Creation: Life and How to Make It 1:13:23 – Thoughts on the art of conversation 1:14:59 – The Most Human Human: What Artificial Intelligence Teaches Us About Being Alive 1:18:30 – Kindest thing anyone has done for Eugene Learn More For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

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

• 0:00Patrick O'Shaughnessy?

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• 0:36Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

• 0:57Speaker 02

  Patrick O'Neal is the CEO of O'Neal Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Neal Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Neal Asset Management may maintain positions in the securities discussed in this podcast.

• 1:22Patrick O'Shaughnessy?

  My guest this week, Eugene Wei, has one of the most interesting backgrounds of anyone I've had on the podcast. He worked at Amazon early in its life, was the head of product at Hulu and Flipboard, and head of video at Oculus. Our conversation is about the intersection of technology, media and culture. We discuss Eugene's concept of invisible asymptotes, why growth slows down for both companies and people, and how some can burst through. I'd list more of the topics, but we covered so much that you should just listen. Finally, I'll say that after spending a day with Eugene, including a wildly interesting dinner with Eugene, past podcast guest Sam Hinkie, and future podcast guest Kevin Kwok, that he is the type of uniquely interesting and kind person I'm always searching for and one that I wish I could bet on somehow. If you know more people like this, reach out and suggest them for this podcast.

• 2:06Patrick O'Shaughnessy?

  Now enjoy our conversation.

• 2:11Patrick O'Shaughnessy?

  So we're gonna jump all over the place because, again, of your kind of smorgasbord of interests. And this notion of travel is a good excuse to talk about your idea of cuisine and empire. So walk us through that concept.

• 2:21Speaker 03

  It was inspired by a podcast I had heard about this book, Cuisine and Empire. I had just realized that when I was younger, music really felt like it was the heart of culture in America. Music was where young kids turned to express their sense of rebellion, to protest things like the Vietnam War. Music was punk rock and all of that was the way that people would choose bands and music to express their point of view on the world. And I realized that now, food has become that for a variety of reasons. One is certainly the advent of the internet and television channels like the Food Network

• 3:04Speaker 03

  started to make celebrity chefs into celebrities. We used to only know the names of restaurants growing up, but nowadays, you can talk to many people who are into food. They'll be able to name who the chef is behind a particular restaurant and all of that. And my notion there was just that we are constantly in this cultural battle to find sources of scarcity. And music and music experiences used to be more scarce. I remember an age when I would try to collect rare LPs or things like that. It would be like a huge find if you went to some weird record store in some weird small city and found one of these mythical LPs that you couldn't find easily.

• 3:47Speaker 03

  Music, concerts and things like that, were these coveted tickets that you would go to and all of that. And at that age, music just wasn't reproduced the way it is now. But now we live in an age of Spotify, and there were the CDs before that, which were just printed en masse. And so it no longer became hard to track down any piece of music. Whereas food experiences, especially at the high end... Are really scarce, you know, the French Laundry, or if you take any three-star Michelin restaurant, they usually only have two seatings at night. Only a certain number of people can roll through that. And so for you to be able to say, hey, I went and had that meal is a badge of honor that you can hold out. It's a scarce accomplishment.

• 4:32Speaker 03

  And so I think that we will always continue to fight that battle because humans are status-seeking by nature. And so we're all trying to find that thing that gives us the edge over another person when it comes to status. And food has really become that for many people.

• 4:48Patrick O'Shaughnessy?

  It reminds me of another interesting thread that you were pulling on, which is your impressions from watching the documentary, The Defiant Ones, about Jimmy Iovine and Beats and Dr. Dre. Would love the key takeaways there because one of the things I want to spend a lot of time on is this notion of scarcity, marketing, identity, signaling, et cetera. So what were your primary takeaways from The Defiant Ones?

• 5:10Speaker 03

  Well, one meta-point was just that I think more things that might only be books in another lifetime should be turned into small videos or documentaries, especially if they involve very charismatic and famous people. So a couple of things about The Defiant Ones. One was just around the marketing of Beats headphones, the whole conception of it. So, you know, prior to Beats, people who were headphone nerds might debate the, you know, like frequency roll-off of high-end headphones and all of that. And so I was really struck by the scene where, you know, Dr. Dre and Jimmy were trying to figure out, hey, what's the state of the art in headphones right now? And they assembled a whole table full of all the leading headphones.

• 5:55Speaker 03

  And they were trying them on. And, you know, to paraphrase, they were basically like, these things look terrible. I would not want to wear one of these. I don't know why anyone would buy one of these. And if you look at the high-end headphone market before then, it really was like a relatively small market, not a lot of differentiation in market share, no clear leaders. And so I think Jimmy, with his marketing expertise, his great insight was, well, hey, we have to make these things culturally significant status signifiers. And if you look at them, they really should be that. You know, Apple recognized this even before Beats with their marketing for the original iPods. How did they do it? They marketed these silhouette images and these posters with these white headphones, because that was the most distinctive thing.

• 6:40Speaker 03

  If you look at the things that are the best status signifiers for humans, it tends to be those things that are most visible, that we have on us at all times. For women, it can be purses, right? Because you're always carrying it on you, and so it's always visible. Headphones are very visible, especially the white Apple ones, which stand out in sharp relief against clothing and everything like that. So Jimmy was like, hey, we've got to make our headphones look hot. They've got to look different than all these other headphones. And so today, you know, if I go on a plane and I see someone walk on with a pair of Beats headphones around their neck, I always recognize them from a distance. That's important. But second, he's like, let's borrow from the cultural scarcity of all these famous musicians and stars that I know.

• 7:24Speaker 03

  I need to get these headphones into pictures. As many famous faces as possible. Onto as many famous people as possible. And he did that. And so in the documentary, all these musicians are complaining about, oh, my gosh, Jimmy, with his headphones. I'd go to a meeting with him, and he'd be like, whoa, whoa, whoa, before you leave, put these headphones on. I'm going to take a picture of you and post this to Instagram or, you know, and share this out publicly. And it was brilliant. In fact, you know, Beats headphones got banned by some of the sports leagues. Best thing ever. Best thing ever, right? You know, the whole idea that bad publicity, there's no such thing as bad publicity, usually holds, and that's, that's one great example of it. So I think that was one of the just meta points there. Another one that I thought was interesting from that documentary was just what separates

• 8:08Speaker 03

  some experts and people, what's a way to identify talent? And I was always just struck by. How Dre was listening to these demo tapes and found Eminem. He heard the tape and he was just like, wait, stop. Who is that? Let's fly this person out, you know? And, and you hear that. And obviously there's selection bias in these stories in hindsight, but I've seen it enough in business and other venues where I do think there's something to that. There are certain people with that gift for spotting talent in a crowd or spotting something distinctive that stands out. And in the arts world where, you know, you might argue that it's just sort of

• 8:52Speaker 03

  a lottery style distribution of outcomes. If you had that little bit of edge, it would be a huge advantage.

• 8:58Patrick O'Shaughnessy?

  Can you tell that story about being convinced to buy a sport coat? And in your travels and why that, why that is kind of an interesting experience? And that will be a, a good segue into the idea of invisible asymptotes.

• 9:10Speaker 03

  So I was in Milan for the first time a couple of years back. And I was traveling through Italy for five weeks. And everyone had told me Milan is kind of the fashion capital. I had wanted to go there really just to go see an opera at La Scala, but I decided to also walk around to all the luxury stores and just check them out. Since that was such a huge part, and I mean, they're all over. They're like, they line the streets there. The thing about these high end luxury boutiques is when you walk in, there's very little clothing on display. I mean, these stores are very minimalist. And I walked in and I was convinced that I wasn't going to buy anything. I didn't really see anything that looked like anything I would wear. And this salesperson walked up to me and she was like, oh, you know, what are you looking for? And I was like, well, I don't really know.

• 9:55Speaker 03

  I was just kind of walking around and checking out the town. And she started chatting with me, just sort of looking me up and down. And she was like, you know, I have a thing that I think you might like. And so she went back to, you know, some storeroom and brought out this sport coat, which I looked at and I was like, oh, that pattern's a little bold. I don't know if that's like quite me, but she had me try it on in front of a mirror. And then she started talking about why it fits so well, you know, how it. Spoke to a certain part of my personality that she had sensed in just chatting with me. You know, you know, I know that I was being sold on something. And yet it was just so polished a presentation and so convincing that after her whole spiel,

• 10:39Speaker 03

  I was like, you know, I really do want to own this four coat. And so I ended up buying it. And, you know, when I was at Hulu, I would go on sales calls sometimes with our ad reps. And, you know, when you go on a sales call with the best sales rep on your team, it's absolutely a great lesson in what sales is all about. This whole idea that they say in poker, play the player, not the cards. Salespeople will tell you, you know, you're selling to that person, not your pitch. Best salespeople go in and they don't just go into some spiel. They're actually trying to understand the client and what their needs are first. And they're adapting the story to that, just the same way that salesperson in Milan did to me.

• 11:19Speaker 03

  And I think in tech, we have this obsession these days with big data. If you just get enough data, you just crunch enough of it, you will just figure out what people want. And I just think that we often lose sight of the idea that there are other paths to making the sale or satisfying a customer need that take a different approach that aren't like deterministic from big data.

• 11:42Patrick O'Shaughnessy?

  It's a great excuse to get into this big hairy concept of invisible asymptotes. What that concept means for businesses, for people, maybe how to identify them. Love to spend a few minutes here. So start by outlining what that concept is and maybe how you first came up with it.

• 11:57Speaker 03

  The concept of invisible asymptotes is just that in business, we traditionally speak of successful businesses as going through what's called the classic S curve. So in the beginning, you're sort of like, you're not growing really. And then you figure out some product market fit and you, your business starts growing sharply. And so that's sort of the, the bottom starts to go up in that classic hockey stick style. And then eventually businesses growth slow. And we have a lot of talk and a lot of cases. And a lot of people obsessing over how to get that initial product market fit, because that's something that almost all startup entrepreneurs struggle with. And it's very hard. Most new businesses fail.

• 12:39Speaker 03

  I had been at companies which had grown up and gone past product market fit, and then had hit the top shoulder of the S curve where their growth flattens. And I just didn't feel like enough people spent time thinking about, why does that happen? And how does that happen? So I wanted to write about it. And my piece really, what brought it up to me was very early on at Amazon, when we had done surveys of customers. And we surveyed two sets of customers. One, customers that did buy from us. We actually wanted to know why they didn't buy more from us. The other side of customers were those who had never bought from Amazon at all. And obviously, to figure out what your total addressable market is,

• 13:23Speaker 03

  you have to understand why people don't buy from you. Most companies in the valley nowadays do a lot of market research, panels, surveys, focus groups. And there is a tendency to focus on, well, look at these people who do use our product. Let's listen to what they're saying. And I'm actually always fascinated by the people who don't use your product. I think there's just much more to learn from the people who don't use your product. And to figure out in your mind, how to segment the market into people who will use your product and won't. But the concept of the invisible asymptote is just that there is something that causes you to hit that top shoulder in the S curve. And it's often invisible to you, but is an asymptote on the growth of your business. And without figuring out what that is, you won't ever break through that barrier.

• 14:08Speaker 03

  And so I talked about a number of different companies that I thought were hitting different invisible asymptotes. And one reason I think the concept is important is if you identify the wrong cause of that flattening of your growth, you will chase a bunch of solutions that will have no effect on your business. And I think one of the most powerful things that any business can do is to clearly figure out why their growth flattened, why certain people don't use your product. And it's often very different than what you think. And the reason is that When we hear from customers that do use our product and why they love our product, it's just so flattering to hear that type of thing.

• 14:49Speaker 03

  And it often resonates with our own belief of our own product's value because we are also usually customers for the products we build. And the thing is, that can deceive you because those very reasons might be exactly the reasons why other people don't like your product. You and I had chatted about Twitter earlier. That was one of the companies I used as an example. Actually, I think the interface of Twitter, the style of its presentation of its content is hugely massively appealing to a certain type of person. But on the flip side, it's also very, very unappealing to another set of people. And so there are a number of other examples that I go through, but I think that's just the most important thing is that it can be very hard to segment our brains this way

• 15:33Speaker 03

  to understand that, wow, the way we've built our product is so appealing and perfectly tuned for product market fit for the segment that we selected to. But it's exactly built incorrectly for all the other people who don't use it.

• 15:47Patrick O'Shaughnessy?

  You gave some examples like Amazon is an interesting one where maybe those were identified and not necessarily removed, but just avoided that through other means, new S-curves were begun, new businesses started. So what do you think is shared in common by businesses that are able to maybe identify or blow through these things?

• 16:04Speaker 03

  Well, one thing that's interesting about Amazon and also a lot of Chinese tech companies, for example, is that they're in many lines of business. We don't tend to see that much in the American tech scene. Most American tech companies, even the largest ones, focus on a couple sweet spots. Amazon is the closest to some of these Chinese tech companies like Tencent and Alibaba and whatnot, which seem to be in a gazillion lines of business. When I was over in China, I met with some folks from a company over there called Meituan, which kind of started as like a Groupon clone type of business and now has over 200 lines of business. They have drones, they have food delivery robots, they have like a Yelp-like site, there's

• 16:45Speaker 03

  just like movie tickets, all sorts of just disparate businesses, like kind of like an old school conglomerate. And if you look at Amazon, they're like that also. And I think there's just this sort of very pragmatic. Focus on what is the customer need and how do we solve that? And in a lot of the lines of business that they're in, there is usually a very practical answer to that question in each line of business that they're in. And Amazon has always had as its mission to be the world's most customer-centric company. So there is this sort of like deep attuned focus to what the customer needs and wants,

• 17:26Speaker 03

  which is a little different, I think, from the approach of genius inventor in a room, thinking of something that the customer doesn't even realize they want and coming up with something from scratch, which I also think is a beautiful story. And we love those stories of individual geniuses like the Steve Jobs of the world that just figure out this is what customers need before they even need it. But the other type of business is often seen, I think, as less sexy. We're just like, hey, here's a bunch of customer needs, they're very obvious.

• 17:55Patrick O'Shaughnessy?

  Go solve them.

• 17:55Speaker 03

  Let's just go solve them. And so I think there is that in common. And it wasn't surprising to me when I was in China that Jeff Bezos is kind of the patron saint for tech companies there. I saw posters of him, quotes from him, hanging in most of the major tech companies, hallways and elevators, because I think they are very sort of Amazonian.

• 18:16Patrick O'Shaughnessy?

  Many of the companies that you profiled in that excellent long article, which people should definitely read, were kind of media, social media type companies. So Snapchat, Instagram, Facebook, Twitter, et cetera. And in the second post, you wrote about this concept of the role that the selfie is playing in kind of our society. And of those networks, I think that I see the Instagram effect on society the most often, because maybe it's my age and I just missed it in terms of the importance and the signaling and everything. But Instagram seems like a really neat, a neat one to spend a few minutes on to get your ideas behind how these things, kind of the medium is the message idea, like how these things shape our behavior, consumer behavior, and kind of how we act.

• 19:00Speaker 03

  Well, I think core to all that is first, understanding and believing in, and I think most people believe this, is that humans are a social creature and that we are status-seeking by nature. A lot of signaling theory derives just from that very simple observation. And I have more thoughts on this, which will probably be the subject of my next post. But if you consider The history of humanity and how we sought out status in different social structures, through our job, in our family, you know, at school and all those different things. We had one set of sort of contained surface areas in which we would pursue higher status. What the internet and social media has done essentially is they've increased the

• 19:43Speaker 03

  surface area of status seeking to a digital realm, a virtual realm, and vastly expanded that surface area. So when you look at young people on Instagram or, you know, Facebook before that, or Snapchat or any of these things, you realize that almost every post could be described as a form of signaling in one way, shape or form. Instagram by being sort of photos only, I think speaks to the most efficient way for young people to seek out status in the world. Snapchat is another thing that's interesting, which we should talk about afterwards. But I think that we have a younger generation which grew up with smartphones that have

• 20:27Speaker 03

  a camera in it by default, so they have a camera with them at all times. I think the behavior shift is monumental and it's something that's just not discussed often enough, which is that young people realize that communicating quickly is most efficiently done by a photograph or video and not by writing text. I actually think if you go back to caveman days and you had given cavemen these smartphones with cameras built in them, nothing else except the camera, I think visual language would be sort of the first language for most people in the world rather than text. That's not to say text doesn't have its advantages in many ways, it's just that photos are, you know, they say a photo is worth a thousand words. There's some truth to that.

• 21:10Speaker 03

  You can express a lot in a photo with your face, the expression. And so if you look at a young person and how they message their friends and you count up the percentage of them that are photos or videos, like snaps, versus text messages, and then you do that same thing for an older generation like my generation, you'll see that's almost exactly the opposite. Young people mostly use photos and everything to communicate. Old people tend to tap out a text message on a virtual keyboard. And so I think Instagram just came along at the right time where they jumped to that transition. You know, Facebook had started with text status updates and had added photos later, but it's always been a mixed medium social network. Instagram was like, oh, this

• 21:53Speaker 03

  is a photo-only social network. Not only is that more accessible to more people, it's more appealing to young people, I think. And so essentially, you know, what I said in my Invisible Ascentos piece was that Instagram is a photo entirely composed of advertisements, you know, not just the official ads, but all the photos that we take and post of our lives. This is the meal I just ate. Look at this beautiful place I just went on vacation. Look at what my husband or wife just got me for my birthday. Look at what my kids made me breakfast and bread for Father's Day or Mother's Day. All these things are little advertisements of our life. And so the things that people say that are

• 22:33Speaker 03

  both good and bad about social media all stem from this, is that we have these massive, massive networks where people have realized it's more efficient to actually compete for status in these virtual worlds than it is in real life. And that's especially true for young people. Young people, before they have a job in the world, before they've gone to college, and like, they don't have a car, they don't have a job title, they don't own a home yet. But what they can do, and what they are very good at, is getting status virtually. This is why, you know, I, when I'm on Snapchat or Instagram, and then I compare my posts to those of really young people, it's just ridiculous, right? They'll post a random selfie and get like 500 likes. It's an astonishing number. I will carefully

• 23:17Speaker 03

  compose a beautiful photo from my vacation and get, you know, maybe like a couple dozen likes. It's just, you know, they grew up in this, this game, this status game, and all their friends are playing it also. It's just a different world.

• 23:30Patrick O'Shaughnessy?

  Yeah, it's amazing. I mean, I think the best episode, or one of my favorite episodes of that show Black Mirror, was the one that it's taken this to an extreme where it literally is, it becomes its own currency. And back to your idea of scarcity, the goal becomes the accumulation of like, social currency through, you know, Like ratings of each other and feedback mechanisms. I mean, it's kind of crazy the extent to which this could go. You mentioned you were writing about it or thinking about writing about it. Maybe maybe preview some of those ideas a little bit for us.

• 23:59Speaker 03

  I'm not a big crypto zealot or expert by any means, but I actually think this is where crypto makes for a beautiful metaphor. So if you looked at the original Satoshi Nakamoto white paper and you look at ICOs, what's interesting is they have this like proof of work hurdle, something you have to do to mine for this currency. And it just, you know, when you describe it to the normal person, they're like, this is so absolutely bizarre and weird. Why is this? And there's a number of reasons. But I actually think the parallels to starting a new social network are there in that if you start a new social network, what are you doing?

• 24:41Speaker 03

  You're setting up some structure where you have some proof of work hurdle. And by having your users do this proof of work, they can mine essentially what's like a social capital currency. So let's take Instagram, for example. Let's call it Instagram Coin. When Instagram was created and they created this network, what was their proof of work hurdle? It was this, you have to take a beautiful, interesting square photo. If you do so, you will mine Instagram Coin. And how do you redeem that coin? It comes in the form of likes. It comes in the form of followers and, you know, comments and just sort of engagement with your work. And so you had all these people essentially mining Instagram Coin by doing this.

• 25:27Speaker 03

  Facebook, any social network has some weird proof of work thing. If you look at Musically in the beginning, Musically was like, hey, how do you demonstrate proof of work here? Well, you have to create kind of a lip sync little dance sketch to these music tracks that we've licensed and posted to our feed. And just like any cryptocurrency, it's much easier to mine this in the beginning when the network is sort of young and hasn't built out. Like if you were one of the people who was on Twitter's recommended follower list way back in the day, the difference in the number of followers you have versus the next person is it's exponential. Like I know a few of those people who are on that list. They have like a million followers or something, right? You know, here, here are people like you and me are like working hard to try to get followers these days.

• 26:11Speaker 03

  Grinding, writing these beautiful tweets, but you know, that's never going to happen again. And that's because as networks expand over time, and just as you know, cryptocurrency gets mined more and more and there are more people, it gets harder, right? Because there are more people competing for it, there's just less of it to give out. And so I think it's really important. Why do you, some social networks succeed and others don't? I think it's hard to come up with a proof of work that's unique, that can actually distinguish among a user base. Like I think you can't create a network if you don't have some proof of work that separates users out from another. Like if every person who posted on Twitter got exactly the same number of likes. Like it doesn't matter what you wrote, you'll get a million likes.

• 26:54Speaker 03

  It wouldn't be a fun game to play. And I think back to, this goes way back. If you go back to early Twitter, pre its growth, and I was an early user of Twitter, everyone was just posting kind of what were like conventional status updates. The, the stuff that people always joke about, like I just had, you know, a bologna sandwich for lunch and stuff. There are like very few likes. I, my first tweet was way back in 2006 or seven was doing my taxes. And then I didn't tweet again for like a year. And my next tweet was a year later and was also doing my taxes. Like no engagement. I was just like, what is this network? And people often remember that as a friendly, fun time on Twitter. But actually, that wasn't even a business. There was nothing there. There was no potential energy.

• 27:38Speaker 03

  So the proof of work is the structure that creates the potential energy in a network. And for me, what caused that for Twitter was the creation of these two sites. There was one called Fave Star and I think the other was called Favored. And what they did at the time, they were like global leaderboards for tweets. They said, these are the most liked tweets across all of Twitter. And when I saw that, for the first time, I was looking at what a really good tweet looked like. And a lot of it was comedy back in the day, the kind, the style of sort of like, single punchline comedy that's very common on Twitter now. There's like no setup. It's all contextual. It's just, just the punchline. And what that did was, it created

• 28:20Speaker 03

  a status leaderboard. And it turned Twitter into a game. And it's the game that we play today, right? Which is get the most likes. And how do you do that? Well, there's a whole bunch of ways to do it. But back in that day, it was to write a funny one liner. And then later, it became, post a really interesting, like fortune cookie like thought, or quip. And there's another form, which is post a link to an interesting article. Now we have the quote tweet, like clapback, you know, you can dunk on like Donald Trump, or somebody like that, you know, like, there's all these forms, right? But what mattered was that there was a sense of status and competition embedded into the network, that created all the potential energy. You know, when celebrities like Justin Bieber and those folks came onto

• 29:04Speaker 03

  Twitter, they brought all their inherited real world social capital into the network, and created this sense of separation, right? Remember when there was the race to the million followers? Yes, yes. You know, was it, I can't remember Ashton Katy Perry and Ashton Yeah, yeah, yeah, right? Like, that energized it. The funny thing is that Facebook had that from the very beginning, because Facebook started off as only for people with Harvard email addresses. It was already, like Harvard, the most sort of canonically elite institution in the United States. And you could only get into this social network if you had one of the email addresses. That meant, from the beginning, there was a status game in Facebook, and the way it spread through the Ivy Leagues and all of that, right? And so Musically was interesting. Musically came

• 29:47Speaker 03

  along, and I thought was an interesting case, because their proof of work was different enough, that there was a whole class, a whole generation of young women, who were like, this is a network where I am uniquely qualified to actually win status, versus some famous VC on Twitter, right? Like, I'm disadvantaged on Twitter. But on Musically, I can kill them in this game, and I can accumulate a ton of followers. And so, they migrated over to Musically in mass. And so I think, all social networks have this proof of work. And to tie it back to my asymptotes theory, The proof of work not only distinguishes who are the winners on your platform, but it also governs the ultimate size that your network can grow to.

• 30:31Speaker 03

  So the problem for a music play will always be, well, there are only so many teen girls in the US who are willing to dance around in their bedroom and do one of these lip sync sketches. You know, I, I don't know you that well, but I don't think that's something that you would spend your time doing. It's not something I would spend my time doing. There are some people who won't do that, just like there are some people who won't enjoy writing little 280-character quips on Twitter. And so every network, almost by definition, chooses Creates its own asymptote, yeah. If you look at the largest network in the world, Facebooks, the We Chats, they almost always have to generalize out their proof of work function over time to attract more users. Facebook, if they had stayed at, hey, you can only post text status updates,

• 31:14Speaker 03

  how large do we think they would be if they had never added photos or videos or all these other things that they do? You know, WeChat, if they hadn't expanded from messaging into doing payments and all the, you know, like gazillion lines of business they're into, wouldn't be as large as they are today. So you'll almost always see the largest social networks broaden out over time. The problem, of course, is that, again, status and the scarcity of status is the potential energy that governs the heat. Like, I like to think of it just like, you know, you just know some networks are hot. They're growing quickly. Everybody's on them, competing. As you broaden out over time, as you make everything easier to do and accomplish on your network, in a way, that status-seeking game loses some of its heat,

• 31:58Speaker 03

  which can be fine, I think, if the network becomes massively useful. You know, I think, for example, on WeChat, yeah, it may not be as fun or as hot now on WeChat to compete for status. On the other hand, you can't live without it in China. You use it to pay for things, pay your bills, pay everything. And so if, if a social network can go really far on the utility access, that's almost always the path that large, large social networks have to take. I think Instagram, Snapchat, all the networks, eventually, are going to be like, well, the status game has gotten a little old. How do we remain relevant in the customer's eye? We have to graduate to becoming super useful in their lives. Because, as you know, status games

• 32:43Speaker 03

  Are fragile by nature. I think there's something here to the idea. Uh, and this was the idea that like Sam Hickey and I had discussed that to refresh these status games on social networks, you almost need some mechanism to clear out old money or the equivalent of old money. If you have these people on Twitter who accumulated millions of followers back in the day, but no longer tweet.

• 33:05Patrick O'Shaughnessy?

  Got to reset it.

• 33:06Speaker 03

  You got to reset the game in some way. Someone new has to come along and feel like, hey, this game isn't rigged. I actually can become famous on this network also, which is a hard thing to do the way that status accumulates typically on social networks. But I think you'll start to see social networks think about that more and more over time.

• 33:23Patrick O'Shaughnessy?

  One of the questions I, I was looking forward to asking you is about this tendency for inequalities to be magnified in digital networks. So if you look at history, like if you go read Will Durant's Lessons of History, a very short book, one of the big sine waves through history is this equality, inequality pendulum. And everything that you've described just now really highlights how easy it is to magnify stuff when it gets digital. And you've described effectively inequalities, in this case for social capital. You know, obviously there's been a lot written about financial capital inequality and things of this nature, power inequality. What are your thoughts there about, and maybe it's the resets that solve this and it's a self correcting mechanism, but what are your thoughts about digital and its tendency to magnify these things?

• 34:06Speaker 03

  Well, we clearly have this winner take all dynamic that it's a result of a number of things that came about when the internet came about. We used to, it's funny, when people used to talk about network effects back in the day, they wanted to teach what networks effects were. They would always use companies like Cisco, where they would talk about the telephone network. But what we're living through now is the largest network effects businesses in the history of the world. I laughed because when I was at Amazon, one of my research projects was, hey, let's research to see if Amazon could be the fastest growing company in history. But it was like, it turned out to be this really hard problem back then for me to actually research. I didn't even ultimately conclude what was the largest growing company. But what I do know is that since Amazon, which probably was at the time, the fastest

• 34:51Speaker 03

  growing company in history, there have been many, many other companies that have far exceeded that hurdle. You know, you had Groupon, you had Uber, you know, these companies now that.

• 35:00Patrick O'Shaughnessy?

  Scooter companies now.

• 35:01Speaker 03

  Oh, yeah. That hit like. You know, a billion dollars in revenue and just like no time whatsoever. And, you know, why is that? Well, we all have these smartphones that are connected to the internet at all times. We have these massively connected social networks like Facebook and Twitter that allow information and ideas to travel more quickly than ever. And so we've taken network effects, which are this sort of like concept that worked in small segments of business and just amplify it to agree we've never seen in history. And that creates these runaway winner take all effects, which we're still grappling with. You know, for example, there's this whole debate about antitrust. How do you deal with tech companies? What's the equivalent here? Yeah. What's like, how do you deal with it when the consumer welfare criteria for defining

• 35:45Speaker 03

  a monopoly actually doesn't apply to these huge network effect companies? And what do we do? Like, do we want there to be companies that have such strong network effects that effectively shut out all competition? And you have that same effect on social networks. You have the runaway celebrities who gain so many followers that it becomes sort of a self fulfilling prophecy. So I think just as social networks have to grapple with that, antitrust law has to grapple with the idea of, well, what are the downstream harmful effects of companies with massive network effects? I think the strongest argument probably you can make is that there's some element of first mover advantage combined with network effects that is partially a function of luck.

• 36:27Speaker 03

  And if we believe that, then we may be sort of cutting off a lot of future competition, which I think is always healthy for markets, just because some company will always get lucky, will always be the first mover in some massive network effect business, and will always runaway with that. Now, there are probably a number of different ways to deal with that problem, depending on line of business. Always, I think the preference is to let markets sort things out, to let some competitor come along and disrupt that. But, you know, I do think there has to be some thinking done around this idea of, wow, okay, luck plus first mover equals massive network effect, like runaway winner. Is that healthy? Do we want that?

• 37:10Speaker 03

  And how do we control that to encourage more entrepreneurs, more people to come along and innovate? And do different things on top of to push sort of like progress forward, to push the markets forward?

• 37:20Patrick O'Shaughnessy?

  I'd love to move to the topic of kind of three topics all in one, and you can choose which direction to go. You mentioned before we started recording your interest in media, generally speaking. You've mentioned a few times your time spent at Hulu and you've written quite a lot about your interest and I think love of movies. So tell me how those three kind of things intersect, maybe what you did and learned at Hulu? And how you think about kind of what to do next, given those interests?

• 37:44Speaker 03

  Sure. So we spoke earlier about my interest in different media types and sort of my sense of the power of photos and videos versus text as a communication medium. So we're already seeing that, right? We're seeing a young generation grow up that are much more visually literate and comfortable with that. And I think that's important because in traditional American schooling, video as a form of language isn't really taught. We're taught writing and grammar and all of this, which, and we have this very powerful cultural association with text and literacy with knowledge and being, you know, one of the liberal elite, for example.

• 38:24Speaker 03

  And I think we have a sort of anti-intellectual bias against video as an art form. But actually, video is just like any communication medium, sort of neutral in its base conception. It's just about how you use it. And I actually think we have plenty of evidence that indicates that video is actually way more appealing than text. You know, if you look at the number of books that are sold each year, the number of books that are read, the truth that not a lot of people like to admit is that most people don't read. Most people don't read very much. If you, if you wonder, if you look at the New York Times bestseller list and you ask how many copies of that book?

• 38:58Patrick O'Shaughnessy?

  Shockingly low, yeah.

• 39:00Speaker 03

  Do you think were sold? And then how many of those books that were sold, do you think were actually read? It's a shockingly low number. It's shockingly low. We just don't like to-

• 39:07Patrick O'Shaughnessy?

  It can be like a few thousand.

• 39:08Speaker 03

  Yeah, yeah. It can be, you know, like a lot of those book deals, if you agree to a book deal, you often have to buy the first couple thousand copies yourself just to get yourself on that list. But then if you look at video, like if you look at something like the Defiant Ones, you know, if that had been a book versus that series on HBO and look at how many people watch that. If you look at how many people watch movies, TV, how many hours a day people watch TV? Video is a medium that appeals to us as sort of like a- A visual sensory feast in a way. And so I've always thought that that was a place where I could arbitrage in that like, I don't think a lot of people actually understand how to make video in tech and why would they? They're never taught this.

• 39:51Speaker 03

  And I still think video has a lot of room to penetrate a lot of markets that we currently still rely heavily on text for. We just, especially now that smartphones all have really nice video cameras in them. And you have this generation of young people who are super visually literate about video grammar, you know, the people who are making vines and all these things growing up. As for Hulu, you know, my time there was really interested in, you know, I had gone to film school before going to Hulu. I've always had sympathy also as an English major in undergrad for artists and creatives. What a tough life that is. I saw there was such a huge adversarial relationship between customers and, you know,

• 40:35Speaker 03

  filmmakers, a lot because studios were sort of sitting in the middle of that relationship. So people would be like, you know, screw it, I'm going to pirate this movie because screw, you know, whatever Columbia or Warner Brothers or whoever, I don't care. But if you ask the most fans of any artists, they actually really are fans of the creators themselves. And so I thought with Hulu, trying to reform that industry from within to create a more customer friendly approach from the studios in terms of how to distribute that work to the end customer was valuable. You had seen with Napster and things, sort of the adversarial approach, which is just like, hey, let's just reform the industry from outside, just blow it up. And that also didn't work out that well.

• 41:17Speaker 03

  And I do think artists should be compensated more fairly for their work because I enjoy seeing the work and I want to see it continue to be made. So that's a big part of the reason for me going to Hulu and trying to reform that industry from, from the inside. And we're starting to see what I, I now see as the first phase of Silicon Valley disrupting Hollywood. And if you look at the history of Hollywood, you'll see how this happened. Way back in the day, movie studios were vertically integrated. They owned the talent. Like if you were Tom Cruise, you would actually work for like an MGM. Like you were an employee. They owned the movie theaters. They owned everything. They made the scripts, they shot the films, and they put them into movie theaters.

• 42:01Speaker 03

  And so these companies had a lot of know-how and unique process knowledge inside their four walls. Well, there was a Supreme Court case where they were like, you know what? You can't own your movie theaters anymore because that's anti-competitive. Because you can just shove your movies down the viewer's throat. And then the talent was like, hey, you know what? We don't want to work for you anymore. We're going independent. So you know, now you have the Actors Guild, all these unions, right? They're all free agents. And studios then became public companies. They got bought by large companies. And what you had was a formerly vertically-integrated institution become now just a thin horizontal slice. And what is that slice? It's largely financing and marketing. That's what they do for films. And you had tech companies who came along.

• 42:46Speaker 03

  And initially their thought was, Hollywood doesn't know what they're doing. And let's try to shake up the business. And they started trying to do all these things to innovate on how films were made and everything. But over time, as they were, they were like basically getting robbed by licensing, you know, these old TV shows for huge amounts of money. They immediately got data back, right? They're like, how many people are watching this stuff? And once you get data, you know, you know the ground truth. And what's, what all the tech companies realized was like, oh, look at all these Hollywood studios. Look at how much cash they have. Like they're, they are barely profitable. Meanwhile, we are these massive companies that are just churning out cash. Why don't we just cut these studios out of the process? And just, you know, for Netflix, just like, why don't I just write a check to David Fincher?

• 43:31Speaker 03

  Why would I wait for him to make something for a new line? And then license it years later for too much money when no one's watching it anymore? Why not just go to David Fincher and say, I'll give you 100 million bucks if you make House of Cards for me? And so this is essentially wave one of Silicon Valley disrupting Hollywood is to say, we have more money than you, and we can actually just go straight to the talent. I always say that Hollywood is such a well-tuned structure that essentially you could treat it like an API. And this is the API. Put money in, get. A TV show or movie out of it. It's very abstracted like that. And that's a lot of what the tech companies do now, right? Apple, Amazon, Netflix. They're like, oh, this is great. I write a check for a hundred million dollars.

• 44:15Speaker 03

  Next week, I get back like 10 episodes of premium video and like no questions asked. It's perfect. And I plug it into my awesome business model where I can make a whole bunch of money from it. And by the way, my, my business has other revenue sources that Hollywood studios don't. So I actually make more profit off this per unit. Well, that is why now we're essentially down to two studios left in Hollywood. There's Warner, which is trying to launch its own streaming service to stay relevant in the world. And you have Disney, which will probably do fine because they have a bunch of incredible IP. And all the other studios are being absorbed or will just die off. So that's wave one. When I think of what I want to do next, it's really, I think, to think about wave two of that level of disruption,

• 44:58Speaker 03

  which isn't just like replacing the studios, but doing kind of exactly the same thing as the studios. It's to think about, how does that business change when we incorporate tech in a deeper way? Into the artistic process? And what does that look like? And I don't know what that is yet. I'm still thinking about it, but I certainly don't think we're at the end of how Silicon Valley will change that entire world.

• 45:21Patrick O'Shaughnessy?

  You said earlier that there's, there's still probably a number of categories where video could replace text effectively. Any examples that you could share with us?

• 45:29Speaker 03

  Yeah, well, just from a simple arbitrage perspective, I certainly think there's a lot of great ideas locked away in books today that are very forbidding and, you know, not appealing to the masses, which could be turned into educational content using video. And that would reach many more people. I think what it takes is, you know, we, we have these MOOCs now, which essentially every new medium kind of recreates the old way. The first TV shows were just kind of like radio, right? You're like, you see that pattern repeated. We kind of saw that with the first wave of MOOCs, which wasn't that exciting to me where, well, let's just film the lecture. But the lecturer is doing exactly the same thing. They're reading off some slides or they're just talking to the camera. It's like super boring.

• 46:12Speaker 03

  When you look at what video is strong at, communicating visually, it's not that. And so I think we will see the next generation of educational content be. Much more appealing visually. It'll have cinematic language and production values. And will open up education to the masses in a way that we've never seen before from texts. I just think if your best ideas in the history of the world are locked away in some dense textbook, by its very nature, it's not going to reach a lot of the audience that wants it. You're just the fact that you and I are doing this podcast, right? Like, the advent of audiobooks was nothing more than arbitraging one medium into another.

• 46:55Speaker 03

  It was like, hey, why are audiobooks so appealing to some people? Well, you can drive and listen to these books. You can be jogging outside. You can listen to these books. By the way, the human voice is super expressive. So the book may be more interesting when read by an actor who can give different voices of the different characters. And most importantly to these mediums like film and podcasts and audiobooks, if you don't do anything, they keep going. A book won't read itself. If you're just like, I don't want to read this book right now. The book is not going to enter your brain, right? But if you're jogging like five miles and you're like, yeah, this audiobook, it's sort of has my intention. The thing is, it keeps going, right? And this is almost the crazy thing.

• 47:39Speaker 03

  When you read an audiobook, you're like, whoa. Because when you look at a book, you know, it can be like hundreds of pages. It looks like this forbidding thing. And then you listen to audiobook, you're like, oh, nine hours. That's like one commute over a week. And then I'm done with the book. It's like amazing. And then yet, a book will sit on your nightstand for like months. You're like, I can't get through it. And so there are all sorts of these like weird arbitrage opportunities between mediums, which I just think haven't been explored.

• 48:03Patrick O'Shaughnessy?

  There's such an interesting trend, like I see it even in the financial world, where it's become table stakes to have some sort of content aspect of your business. There's just With very few exceptions, and this is like the ultimate scarce examples where it's like really small investment partnerships or really niche type stuff, maybe doesn't need this sort of exposure. And it's marketing is the fact that it's mysterious and scarce and quiet. But for any business that's like reasonably open and the products are reasonably accessible. It seems as though in the financial community and in others, you need some sort of content strategy. And then what becomes interesting is the like the relative cost of these different things. And so, you know, we can write the best white paper ever, and we've written a few this year.

• 48:45Patrick O'Shaughnessy?

  And the really fantastic ones might get 50,000 people reading them. And that's like esoteric weird quant stuff, right? Like, that's a big number for for a very specific topic. That is like the absolute floor for any conversation I have like this very casually with someone interesting. So there's this multiplier effect. And by the way, that white paper is arduous and costly in terms of, you know, mental capacity and time and editing. It's a nightmare. It's multiples as hard as this podcast. And the podcast is multiples as effective at at reaching an interesting audience. And and so it's just, I'm fascinated by like where the sweet spot is in all of this because I think video ultimately like, take the defiant ones again, that was one of the most effective pieces of four hours stitched together that I've ever seen.

• 49:30Patrick O'Shaughnessy?

  To learn about something, to be entertained, to to really take lessons away. I mean, it was it was kind of a masterpiece in content creation, but arduous. Like, I couldn't do something like that. So I'm just interested by like, there's these companies popping up that do support and like basically are toolkits for content creators. And I'm just, that's why, you know, your interest in media overlaps with my own. I just think it's such an interesting need for almost every company to have this arm of itself. And finding the sweet spot for each, and some do it better than others, to grow their own businesses.

• 50:03Speaker 03

  Yeah, well, I'd be curious to hear your opinions on this, but Neil Postman wrote Amusing Ourselves to Death, which is this amazing book. And one of the most-

• 50:10Patrick O'Shaughnessy?

  The opening pages of that book are some of the most memorable of any book.

• 50:13Speaker 03

  Yeah, yeah, I so wish you were alive to write about this current internet age. But essentially, the one of the core ideas from his book, which is so important and even more relevant than ever today, is that everything has become entertainment because of the mediums through which it's transmitted. And the idea I'd add on top of that, which is really important now, is that we now live in what I like to call the big bang of content. This is the age where content went to infinity, effectively. It's not infinite, but effectively. That is such a difference from the age of scarcity that we used to live through. And what it means is that formerly you could sort of stay in your lanes. Like you could be a research facility and just write white papers and just like, look,

• 50:57Speaker 03

  I mean, what else are people in my space going to do? They have to read my white paper because that's essential. That's like the only type of content in my business. But what changes in our age today with a smartphone is that at any point in time, you are competing with what's on a person's smartphone. And that means that formerly different lines of business and different industries now compete head to head. You may not feel it entirely, but Fortnite is just as important a competitor to the film industry as the next studio over. And because of the way the mediums are structured, everything is becoming entertainment. Politics became entertainment long ago. You don't have to look at our current president to say, oh, okay, like politics is a form

• 51:41Speaker 03

  of entertainment, like this former reality star. If you look at, for example, what Ocasio-Cortez is doing right now, amazing, right? Because she sort of understands, whoa, in this different age with different distribution channels, the game has changed. And she just happens to be young and she understands these mediums natively, whereas most senators and congressmen are these really old white men who probably don't understand how to use Instagram or what it's all about and all of that. And so the fact that you now are doing podcasts is just a reflection of the fact that part of your business has to be entertaining. It didn't used to be. Now it has to be. And so I think everyone now has to figure out with their content how to compete with

• 52:26Speaker 03

  every other form of entertainment. That's a sort of invisible asymptote or an invisible competitor that many businesses just can't see. If you were a Video company, you're not looking at what's going on probably in e-games or what's going on on Instagram or something like that. But every person now has a choice at any moment in time for how to entertain themselves. And they are going to go to the best option because it's one tap away on their phone. And that means the bar has been lifted, the game has been lifted. There's a sort of entertainment hurdle, which is ever rising, which is sort of like some analog to BOMO's cost disease. I just think there's some entertainment hurdle now, which everyone has to surpass. And it's amusing, right?

• 53:09Speaker 03

  Like our young kids, my niece, I look at her and I'm guilty of this. I take a lot of photos of her on the phone and she's always like, let me see as soon as I take it, right? I'm training her to be an entertainer from a very early age, right? When she grows up, she's going to be way ahead of me in understanding that. The reason I don't send snaps or things like that to message my friends is I didn't grow up with that behavior. But yeah, the world has changed.

• 53:36Patrick O'Shaughnessy?

  It's amazing and it affects all of us because our businesses are relying on these things. I wonder what your thoughts are on the personal side of the invisible asymptotes. So in exactly the same way as you described for companies, that you're sort of doing one thing. And if you don't evolve, you hit, everyone hits the top of that S curve. How do you think about that from a personal standpoint? In any way you want to describe it, it could be, you know, your business skills. It could be, you know, how you treat people, whatever. How do you think about that?

• 54:05Speaker 03

  Well, look, it's human nature to not be good at taking feedback. Some of the most interesting arbitrage opportunities in the world. You always hear this, it's such simple advice and yet it's shocking that it's not standard behavior. But if you're a CEO or an executive, almost everyone tells you to get a coach, get an executive coach. Atul Gawande wrote this great piece years ago in The New Yorker about, he's a world-class surgeon. And yet he asks a peer of his to observe one of his surgeries and give him feedback. And he was like, oh my gosh, I got all these notes on things that I missed. And the thing is, we're just terrible at looking at ourselves. We will always be the most biased observer of ourselves. And so it's human nature, if you become successful over time, to just feel like you don't need,

• 54:50Speaker 03

  like you know it all, right? Like you don't need any coaching, you don't need any feedback. And you know, I have this core thought that almost everything in the world could be fixed by tightening feedback loops in general. You know, why is it so hard to exercise and eat well? Well, the problem is the feedback loop is too slow. Like if I could go out for a jog for three miles. Lose five pounds. And lose five pounds, you bet I would be jogging every day. But the thing is, you have to jog over and over for like, you know, weeks on end before you start to feel your pants loosen up. And you know, that'll happen. It's just, and it's the same thing with eating, right? I eat these 10 french fries today. I don't pay an immediate penalty and they taste really great because the feedback loop on taste is much faster than the feedback loop on your nutritional loops.

• 55:35Speaker 03

  And so that's the thing with invisible asymptotes is a lot of them are just caused by very slow feedback loops. And so a simple thing that most people can do is just increase the number of feedback loops. Like for me, myself, it's having those friends or peers or things that will give me honest feedback on where I need to develop. One of the problems is, you know, the average tenure of employees at companies in tech now is

• 55:59Speaker 03

  short. It's like two years or something at startups. And there's a whole bunch of reasons why that happened. The economic models of stock options, the way that companies, like for all a number of reasons, that is the case. One of the problems is that if you, as a company, look at an employee that's only in this day for two years, how much are you going to invest in training? It's just not worth it. They're going to take that training and go to some other company, maybe one of your competitors. And so the problem is that if you look at the business world, you have all these employees enter companies. It's like, hey, when you start doing this job, and then they're responsible for their own learning. It's not really great education or anything like that. Companies don't optimize for educating. Like I think it would have been different in the age where people worked at one job for life.

• 56:42Speaker 03

  Then it really behooves you economically to train that person to be the best employee possible. But we're not in that age anymore. You know, I just got back from Japan where the Japanese are famous for, you'd have these like craftspeople who become the best at. Yeah, seven years making rice and sushi or whatever. Yeah. Jiro dreams of sushi, right? It's a canonical one that people are familiar with here. And a lot of that was based on an apprenticeship model where you would go serve a master and. Study them and learn your craft. And you know, in a way in our modern world where everything's like short tenure, everything that that doesn't happen. And so besides tightening your feedback loops, I think we have to get used to this idea that everybody has to take responsibility for their own learning in a way.

• 57:27Speaker 03

  We've actually never had more resources available to everybody for learning YouTube and all these free resources online. But the discipline to take advantage of that is still super rare. So I think I have still have much to learn on many, many dimensions. And I've tried to sort of adopt those things, tighten my feedback loops and then taking responsibility for my own continued development.

• 57:51Patrick O'Shaughnessy?

  The feedback loop implies like there's something you're trying to achieve. And so if the five pounds or the inch off your waist is the goal, at some point in the future, and if it's a slow feedback mechanism, the odds just suck. Whereas if you reframe it as no, like all success is just habitual, it's just, it's just habit formation where you actually fall in love with the habits themselves and not the goal that's distant, that you just sort of like short circuit the system. You then live for the process versus the product. Now that's hard. It's really hard. And I think it requires a philosophical buy-in. In my case, took me years. Took me years to convince myself that this idea was true. And whether or not it is true or not, I could be fooling myself.

• 58:34Patrick O'Shaughnessy?

  It doesn't really matter because the outcome is that I focus on habit creation and very small bite sized habit creation, high frequency habit, you know, daily stuff, weekly stuff. You know, this podcast is a good example where you don't know maybe what the content of it's going to be. I don't know who my guest is going to be next, who the next person I'm going to talk to is, but I'm going to talk to somebody for an hour and, and put it out there in the world. It's an interesting problem and it gets a lot of attention, but not a lot of action.

• 59:01Speaker 03

  Yeah. And you know, writing school famously, they teach you that the idea of the muse is inverted. You know, it's this idea, I write when the muse visits me. And it's like, how does the muse visit you? The views visits you when you write. And so this idea of just showing up continually, I'm fascinated. Like if you look at interviewing. Views of successful people, you're always like, hey, you know, what's the secret to someone's success? And you hope that there's some magical thing that you can adopt.

• 59:25Patrick O'Shaughnessy?

  What exercise and survivorship bias?

• 59:27Speaker 03

  Right, exactly. But one thing that I find is very common among all successful people is they have lots of goals. They set goals. To me, goals are just a hack. And it works, actually. The time that I set a goal to run a marathon, I ran a lot that summer. And a goal is just gamifying your own life. It's like you said, it's making the habit drive towards something. So like, for example, this month, I have a goal of doing 2,000 pushups. And I just randomly set that and started it. But as soon as I started that little Google spreadsheet, every day before I go to bed, I remember, oh my, oh my God, I gotta do my, you know, whatever, like 100 or 50 or however many it is.

• 1:00:08Speaker 03

  And I keep up with it. And so that's such a simple hack that I always tell people to just set even, just set even arbitrary goals all the time. Just have a whole bunch of goals. And you will just automatically align, because a goal really is just a way to structure your time and align your incentives into a very rigid sort of path. And you know, the same way with you with habits, right? Like, we're bad in the absence of weird artificial constraints like that in knowing what to do. A goal just aligns all your, your loops and everything.

• 1:00:39Patrick O'Shaughnessy?

  Yeah, maybe we would sum up the whole conversation with just, these are all kind of versions of scarcity, like controlling scarcity, controlling your own patterns is an incredibly powerful way. And then you could obviously scale it up to the business level to do really interesting things.

• 1:00:52Speaker 03

  Absolutely. I think the number one scarcity we all have is that, you know, we're all gonna die someday. So that's maybe the master scarcity that should govern everything about how we spend our time and everything.

• 1:01:02Patrick O'Shaughnessy?

  Because of your, I think your thirst for experience, I would just love to get a few recommendations from you in a few categories before we wrap up. So the first would be on travel, which is where we began. What are just a couple really special places? And this, you know, you wrote about alleys in Taipei, and I loved that post. And this could be as specific or abstract as you want it to be. But when it comes to travel, what pops to mind?

• 1:01:24Speaker 03

  So the mode of travel that I find, this is general, this is not applying to any. Specific place now, you know, when I was younger, I think, and I was visiting so many places for the first time. I would go off of guidebooks and things, which usually have a list of sites, iconic sites that you have to go see. And in the age of Instagram and everything, you know, it becomes sort of like this checklist scavenger hunt. You're running around, you're like, I, you know, I have to go see the Sagrada Familia in Barcelona. I have to go see the bridge in Prague or whatever, and it's a little bit exhausting. And this idea of understanding the path dependence of culture and everything means that now what I mostly like to do is, it's fine if you want to hit some of those big sites on your first day there.

• 1:02:06Speaker 03

  But mostly I want to embed myself with some people who've grown up in that place. And spend enough time with them, you know, eat a couple of meals, take them out, like have them walk around and, and ask them questions about their everyday lives that help you to understand actually their worldview. Ask them what they find bewildering about American culture and what they find appealing about it. Ask them in their daily lives, you know, like what media they consume. And all these things I find have made travel just much more interesting for me. There's so much hidden knowledge that's not in guidebooks, that's in the minds of the people who live there. You know, the whole Taipei alley investigation really just came from me asking a local there.

• 1:02:49Speaker 03

  I'm like, what's the deal with all of that? And when I was just in Japan, I also noticed the same thing that triggered my, my conversation in Taipei, which was like, hey, there are no public trash cans. I was walking around with this, this empty plastic cup and I was like, I have nowhere to throw this out. So I carried it with me for the whole day. I was like, why are there no public trash cans in Japan? And, you know, someone had told me that it came from the sarin gas attacks in Japan many years ago, where they were like, hey, we don't want these trash cans in public where. Someone could hide something like that. Whereas in Taipei, it was a totally different situation that explained that. So that's my meta travel recommendation.

• 1:03:29Patrick O'Shaughnessy?

  I love it. By the way, that's a recommendation in not just physical places, but intellectual curiosities too. If you want to learn about whatever it is, venture capital investing, go talk to six or seven venture capitalists and have them be your guides versus reading a hundred books. You're gonna, you're gonna leave it way better informed and with a much better understanding of nuance. I think that's the beauty is like the beauty of travel and exploration of any kind is the nuance of it all. That's kind of what makes it beautiful. So I love that advice. How about movies?

• 1:03:57Speaker 03

  I like all types of movies. So I'm generally not prescriptive on like, I think you should find the types of movies that you enjoy. But I think that one way to heighten your appreciation of anything like film is to just better understand how it works on you. Like, why does a good film work in a certain way? And why does a bad film work in another way? And just like with sports, if you played a sport growing up, you will have a much deeper appreciation when you watch it of what's happening moment to moment. I don't have as deep an appreciation for soccer because I didn't play it as a youth. But recently, you know, in watching soccer with some people who did play it growing up, they were able to give me a lot of pointers on, hey, what's happening here and there?

• 1:04:42Speaker 03

  What, why is this little, little exchange very extraordinary? So with film, and one thing you can do with a lot of DVDs is to listen with the commentary on. So find a movie that you love that has a director's commentary. Turn it on and re-watch the movie with commentary and listen to a little bit about that. Or there are a bunch of books that are all about film visual grammar. And some of them are pretty light. Having one book like that and just flipping through it and, and understanding a little bit about why a shot works a certain way on you is great. For example, there's a famous shot in Jaws. It's called a Zali shot. And it was first used in Vertigo. But what it is, it's called a Zali because it's a combination zoom and dolly shot.

• 1:05:27Speaker 03

  You zoom one way in the shot, like you zoom in, but you dolly the camera away. So it changes the perspective, right? In Jaws, it's when he first spots the shark and they do the very famous Zali shot on his face. And what a Zali indicates is that Someone's worldview has changed significantly in that moment, right? When he sees the shark, he realizes what his adversary is, that it's real and that it's a big problem. In Vertical, they do a Zoli shot of the falling down in the tower, which famously just creates, that was creating a sense of disorientation that he felt because he had Vertical and he was scared of heights. In Goodfellas, one of my favorite films, there's a very famous Zoli shot where Ray Liotta goes to meet with Robert De Niro

• 1:06:10Speaker 03

  in a diner near the end, and he's trying to decide, Ray Liotta is trying to decide if he's gonna flip and become an informant in exchange for a lighter sentence from the government. And he goes to meet De Niro and De Niro's like, hey, I've got this job for you. I need you to go to this place and take care of this one thing. And in that moment, there's a subtle Zoli shot on that because that's the moment that Ray Liotta realizes, and he says this in the voiceover, I knew I would never come back from this job. That's the moment he realizes De Niro has, wants to get him killed. And that's the moment he decides to turn states informant. And so just a subtle thing like that, these are the types of things you may hear in a commentary.

• 1:06:51Speaker 03

  There's another famous move in film, there's a, there's a rule in film, it's called the 180 rule. It's if I were to film this conversation between you and I, I draw a line between the two of us and that splits the world in half. And all the camera shots should be on the same side of that line in order to not disorient the viewer. And you'll see this in every movie you go to, you'll just see if there's a, a two-way conversation, they'll shoot over my right shoulder and they'll shoot over your left shoulder. They'll never do the my right shoulder and your right shoulder because then the world flips and it's confusing to the viewer. But if you know a rule like that, then you know when it's violated by a filmmaker that something is happening. So there's a shot in The Insider by Michael Mann where in the beginning, Al Pacino has been kidnapped

• 1:07:36Speaker 03

  and they have a bag over his head because they don't want him to see where he's going. He's going to interview somebody. And when the bag is taken off of, over his head, he's having this conversation with the person. The camera subtly goes from behind his right shoulder to his left shoulder. It's because there's a pivotal point in the movie where something changed and the filmmaker wants you to know this. And Michael Mann does this quite a bit. There's also a famous move like that where he crosses the 180 line when Robert De Niro is talking to Amy Brenneman for the first time in Heat. And it's when he warms up to her for a moment. At that point, when the camera crosses that 180 line and it's like such a such a powerful, visible move, you're like, why does the camera move like that? It is foreshadowing the fact that Rappo De Niro has now violated the rule that he tells

• 1:08:20Speaker 03

  everybody in that film is never get attached to anything, that you can't drop in 30 seconds flat if you feel the heat coming around the corner. And you see that later in the film. He violates his rules and that leads to his downfall at the end of the film. So there are all sorts of things like this, which I think if you, once you learn them, every time you're watching a film, you will start to understand how it works on you. And I think understanding how something works doesn't have to remove the magic of it.

• 1:08:47Patrick O'Shaughnessy?

  It can amplify it, right?

• 1:08:48Speaker 03

  Yeah, absolutely.

• 1:08:49Patrick O'Shaughnessy?

  Two more categories and then a closing question. The first is, I'll call it just products. I know you get asked often to evaluate a product, given, given your experience. And, and I'm always intrigued because as I thought about it, actually in preparation for our conversation today, I was on my iPhone and I was trying to type the things, products, I guess is loosely the right term. It could even be companies, like Apple might be one option, where a reverse order of their indispensable nature to me, like what would I want to lose last? If I, if I had to slowly prune products for my life, like which would I want to lose last? And like, for example, one that was on the list was like my local butcher, right? Like, I just like really, really liked the experience of that and I would be super bummed out. Like, I'd rather lose Instagram than my local butcher and cheese shop.

• 1:09:32Patrick O'Shaughnessy?

  And so I'm, I'm always just really fascinated by what makes a product experience great, magical, delightful. And because you see a lot, I'd be curious to know of either at the meta level, you know, what you think drives those magical experiences? Or at the more tangible level, some examples of products that you've seen or used more recently that you think are wonderful.

• 1:09:54Speaker 03

  Well, I think at a meta level, over the years, I guess my product thinking is always evolving a little bit. I've worked on lots of products. Some have succeeded the way I wanted them to, some haven't. You're always learning a little bit. And, and the way I've come to think of it, especially when building software products, is that It is a form of sort of like indirect communication. The software interface is a form of language, just like film is a form of language. Film, you're making the film on set, doing all these things with the actors and your cameras and your lighting and the script and all of that. But you know, at some later date, you are not going to be there to guide the viewer through that experience.

• 1:10:38Speaker 03

  They just, the work has to speak for itself. Products that have software interfaces are like that. Once I've built the product and someone's using it somewhere in the world, on their phone, on a browser, I'm not going to be there to explain it. And so there's just always a level of communication and legibility in the product that has to be built in. And so a lot of, I think, product development is trying to decide how much legibility has to be built into the product while retaining some sort of elegance. And I like the idea of elegance, which is, I've heard this definition once, I think it's in Steve Grant's creation where

• 1:11:19Speaker 03

  elegance is the maximum amount of information communicated in the minimum way. And so I think that's my sort of general guiding product philosophy is it's a language where you're trying to achieve that balance of elegance. If you are too minimalist or anything and no one has to use your product, then there's information being lost, which is terrible because ultimately you're trying to serve a need for the customer. If you're overly legible, you probably are too noisy. You've communicated a lot of information to the user, but you've, you know, created all this noise that's distracting and it's unpleasant to use. And so there is something into it. And maybe it's because I just got back from Japan, you know, this idea of the zen simplicity.

• 1:12:03Speaker 03

  Clean, but I think people confuse sometimes minimalism for elegance. Elegance is, minimalism is a one approach to achieve that elegance. But remember, it's maximum information communicated. The ratio, not the absolute. It's the ratio that really matters. You know, in terms of products, it's always hard for me to, I should just come up with a list of things that, you know, so I can think of them off the top of my head, but. I will say that during my travels, I thought a lot about Google Maps because I used it a lot. I just think, and I had written about this briefly, that I think Google Maps is the most interesting Google products because there is so much underlying information that forms a sort of structure that could be reoriented for many different uses.

• 1:12:45Speaker 03

  So when Google looks at its portfolio, I'm sure it's very concerned about making headway in some areas where it's not as strong. Commerce, social, you name it. And I actually think Google Maps is potentially the most useful approach for them to take to attacking a lot of these markets. But again, you're trying to balance information and how much is in the interface. And the interface of Google Maps today on a phone is optimized for helping you go somewhere and get directions. But if you took that underlying data and all that and said, all right, many people want to do a search to buy something, or they're trying to find their friends to interact with them around different things.

• 1:13:26Speaker 03

  Location can be an important component in all of that, and Google has a ton of amazing data in there. What interface into Google Maps would optimize for that type of thing? And I think as VR gets big, you know, the ability to 3D map the world in a way will become this hugely important base of information off of which virtual worlds are built and in the way we, you know, navigate the world. So I'm sort of intrigued right now by Google Maps. Like, I think it has a lot of hidden potential and value.

• 1:13:56Patrick O'Shaughnessy?

  The last category that I'd love your, any thoughts on is conversation itself. So like the art of conversation itself as a medium. It's kind of the one we haven't talked about. Talked a lot about video and text and voice, and sometimes video is a way of capturing conversation, but maybe the art of engaged conversation. Any thoughts there?

• 1:14:15Speaker 03

  Yeah, I have, over the past year, spent a lot of time just pinging random people from Twitter that I found interesting and saying, hey, let's meet up in real life. And one of the advantages of conversation over, let's say, a linear medium like text or reading someone's text is just the ability to adjust mid-course, the give and take of it. Obviously, body language and voice are very expressive in their own ways. But I think the biggest thing for me is the ability to just sort of double-click on anything quickly and jump into this or that, which you get with conversation with someone interesting, which you won't get if you're just trying to read a body of their work. Not everybody's a great conversationalist.

• 1:14:56Speaker 03

  I'm not sure even that I am, and I'm not sure what necessarily goes into being a great conversationalist. So that's something that I'm continuing to sort of just like study and examine. You know, you can go talk with some people who are great conversationalists, but probably a simple place to start is just by listening well and reading. In a conversation, the other person is kind of your audience in a way. So the ability to sort of read that other person and draw on something that you think is interesting about them. I went so far as to actually, there's this great book called The Most Human Human, which was about a person who entered the Turing Contest.

• 1:15:37Speaker 03

  So the Turing Contest is computers trying to impersonate people in a typed exchange, conversational exchange. The Most Human Human is an award given, so there's five computers and then there are five human judges that you interact with. And at the end, the contestants rate all the people that they chatted with from most computer-like to most human. And the human that is ranked the most human wins this Most Human Human Award. And so what that book got me thinking about is, well, what is it that makes a human a human in conversation and interesting? This is exacerbated by the Google autocomplete sentences in the new Gmail, where you're like, oh, my gosh, this robot can tell exactly what I'm writing. Do you find yourself intentionally writing something new? I do, I do.

• 1:16:20Speaker 03

  So there's a mathematical measure. It's called conversational entropy, which is how predictable is the next word that you're going to type or the next letter? Right? If it's highly predictable, your conversational entropy is low. And if it's very unpredictable, then it's high. And so with Google's exposing to all of us is that most of us have low email conversational entropy. And what I find is the high conversational entropy is correlated with interestingness as a human being. And so this book is all about this person's goal to win the most human human war. And he studies all these people, you know, there's this set of cards. I think they're called hypotheticals or something like that. They're like cue cards of questions that you should ask people in the next conversation. And it's sort of a gimmick.

• 1:17:06Speaker 03

  They're like sold as a box, but I bought this because I was like, hey, am I like a boring conversationalist? And I realized, you know, going back to all these like exchanges I would have with people at parties. You know, you go up to people and you're like, oh, what do you do? How's the weather? It's like, you know, like, oh, my gosh, like a computer could do all of this.

• 1:17:21Patrick O'Shaughnessy?

  On autopilot all the time.

• 1:17:22Speaker 03

  Super boring. And so these hypotheticals were crazy questions that were like, I don't know that they aren't necessarily the answer to this problem, but they would be like, a wizard walks up to you in the street. The wizard says, I have the power to increase your beauty in some correlation, based on the amount of money you're going to give me right now. How much money would you give this wizard? You know, like the questions like that. There is another one I remember is like, your friend is going to die unless you just walk up to your friend. And I it's like either like kick him while he's sleeping or just punch him in the face. But you can never tell your friend why you did it. Like, would you do it? Like, it's also like weird questions like that. And like, I think they're sort of like fun, party conversation starters. But it's more the idea that.

• 1:18:05Patrick O'Shaughnessy?

  Get out of the rut.

• 1:18:05Speaker 03

  Yeah, yeah, like genuinely ask something that isn't something that a computer would just autocomplete for you in a conversation.

• 1:18:14Patrick O'Shaughnessy?

  I'm sensitive to share this here because it's so nice to have it. People not expect that it's coming because I do this a lot now. My friend Lloyd Vardy taught me this when I was in Africa and we had to introduce us a group of six guys to each other. That other than one, we had, we had never met each other. And the method is extremely simple, which is give a short introduction of yourself. Here are the things you're not allowed to mention, where you're from, whether or not you have a spouse, what you do for work, whether or not you have kids, where you were born. Like basically there's like seven or eight of it's the equivalent of like, oh, how about this weather? You know, like stripping away, it seems like the art of conversation in many times is stripping away the norms and getting the other person to say things that they haven't said before or thought about before, but not just having it be one sided.

• 1:18:58Patrick O'Shaughnessy?

  If that goes both ways, you've got kind of a magical conversation.

• 1:19:01Speaker 03

  Yeah, absolutely.

• 1:19:03Patrick O'Shaughnessy?

  So my closing question for everybody is for the kindest thing that anyone's ever done for you.

• 1:19:07Speaker 03

  I'll mention one thing, which actually I always think of as sort of having changed my life. And this was when I wanted to go work in the internet space. I was out of undergrad. I had deferred law school because I just was like, I don't know if I really want to go to law school. I was working a consulting job just to pay off my loans and I, you know, this is like ninety six ish. And I was like, wow, this internet thing, I just love internet. I just want to be in that space. But I had like very little work experience, very little qualifications. And I really wanted to go work at Amazon because I loved books and I was buying all these books from Amazon. I was like, oh, this is perfect. I look at their website and all the job listings

• 1:19:49Speaker 03

  were like, requires ten years of computer science, or ten years of experience, or a masters. I ultimately applied for VP of Business Development, which is laughable. I mean, undergrad at colleges, like ten years of experience required. I obviously didn't qualify. But I wrote a three-page cover letter outlining my passion for the company, why I wanted to work there. And a random recruiter at Amazon got my cover letter and she read it and she was like, well, this guy's clearly not qualified for this position. However, I really like his cover letter. I'm gonna pin it over my desk. And some, at some point, if something comes along, I'm gonna call this person. So I got one of those like, thanks, we'll put you on file

• 1:20:30Speaker 03

  postcards. I didn't hear for six months and I was like, okay, like, move on. And she actually then found a position that she thought I qualified. She called me six months later. I was like in London on a case. And she was like, hey, I'd like to have you come in. I was like, oh, okay. And when I went, you know, like, it's just one of those weird things where she didn't have to really do that. She was getting tons of letters and she really just showed me that she had it pinned over her desk. And, you know, if I hadn't gone to Amazon, I really don't know. I mean, think of how different my life would be. That was my business school. That was my education and that was my entree into tech and all of that. So that's something that comes to mind.

• 1:21:12Patrick O'Shaughnessy?

  Fantastic. Well, this has been so much fun. Let's keep it going at dinner. Thanks for doing this.

• 1:21:16Speaker 03

  Awesome. Thank you.

• 1:21:19Patrick O'Shaughnessy?

  Hey everyone, Patrick here again. To find more episodes of Invest Like the Best, go to investorfieldguide.com/podcast. If you're a book lover, you can also sign up for my book club at investorfieldguide.com/bookclub. After you sign up, you'll receive a full investor curriculum right away, and then three to four suggestions of new books every month. You can also follow me on Twitter @Patrick_OShag. If you enjoy the show, please leave a quick review for us on iTunes, which will help more people discover Invest Like the Best. Thanks so much for listening.