#40 Ben Thompson: Thriving in a Digital World

Today’s guest is Stratechery author and founder Ben Thompson. If you’re an investor in Silicon Valley, work at a tech start-up, or just love to geek out on technology and business analysis, odds are good that Stratechery is on your short list of must-read blogs. What started as a side project, quickly ballooned into one of the most influential tech blogs on the web. The New York Times called Stratechery, “one of the most interesting sources of analysis on any subject.” I agree. In this interview, Ben and I cover a lot of ground. Here are a few of the things we discuss: Learn once and for all how to pronounce Stratechery. :) How Ben’s business model was developed and how he massaged it over the years to become what it is today The one metric Ben looks at each day to gauge the health of his business How Ben deals with people who rip off his work and pass it off as their own Ben’s thoughts on pricing, free trials, content and other important aspects of online membership sites How Ben structures his day to churn out such incredible content so consistently How Ben handles being wrong on his site, and his process for screening his work for confirmation bias How the internet has changed the traditional view of supply and demand, and what companies should do about it What Ben would teach an MBA class about internet strategy (if you do any business online, you need to hear this) What it would take for a start-up to overtake Google or Apple, and the vulnerabilities that all companies share, no matter how big or profitable The new era of technology and how companies like Netflix, Airbnb, and Amazon are doing it right (and what you can do in your own business to take full advantage) This is one of the most jam-packed interviews I’ve done on the Knowledge Project. Ben’s answers are so thoughtful and informative that you’re going to want to have a notebook handy. Go Premium: Members get early access, ad-free episodes, hand-edited transcripts, searchable transcripts, member-only episodes, and more. Sign up at: https://fs.blog/membership/ Every Sunday our newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:00Speaker 00

  You need to learn to consistently and repeatedly start with new assumptions.

• 0:16Shane Parrish?

  Hello and welcome. I'm Shane Parrish and this is The Knowledge Project, a podcast exploring the ideas, methods, and mental models that help you learn from the best of what other people have already figured out. To learn more about the show or our previous guests, go to fs.blog/podcast. My guest today is Ben Thompson, author of the technology site Strategory. I reached out to Ben because Strategory, which provides analysis on the strategy and business side of technology on society, is one of the few sites that I read. Just like us at FS, Strategory also offers both free content and paid content as a means to sustain a living. As you'll soon find out, Ben has an interesting take on most things. Enjoy the conversation.

• 1:09Shane Parrish?

  Strategory, is that even how you say it? Is it Strategory?

• 1:13Speaker 00

  It is. It is. Strategy and tech. I like to say that naming things is clearly not my forte. It's weird, though. I mean, you can, I, it's kind of a running joke with me and my subscribers about the name, but there is, there is a good reason that I chose it. And it's very, you know, sort of prosaic, which is, it was, I was poor, in debt, and I was starting a website and it was available. It returned zero Google search results. There was a Twitter handle available. And, you know, it was broadly in line with where I was going. And I think someone I was inspired by was Horace Edgway with Asimco. And Asimco is, you know, such a great name. I think the mistake clearly that I made is a name that is unclear how to pronounce and unclear how to spell is, is a bad idea. And so if I

• 1:57Speaker 00

  could do it over, would I do something different? Probably. But, you know, I think it just, you know, the challenge of building the brand is just a more pressing one, given that sort of like hurdles I managed to put in my own way. But yes, it is, that is a long way to say, yes, it is Strategory.

• 2:16Shane Parrish?

  It's kind of interesting. I mean, it's like a super unique take on business in the sense that you're hitting on the intersection kind of between technology, media, business strategy, but also like you're hitting on undercurrents of psychology and behavior to a degree. I mean, your insights are pretty consistently incredible. What is it about to you? What does stratechery mean?

• 2:40Speaker 00

  That's a good question. I mean, I think the way I describe it, as you kind of noted, is the the sort of strategy and business of technology. And I've kind of appended, you know, and its sort of impact on society. I think one of the great things about writing about technology is it kind of gives you a license to write about almost everything because technology is impacting everything, whether that be, I mean, clearly we've seen in the context of politics, you know, I wrote about Zuckerberg being in in Washington DC this week, but, you know, I've written other articles about, you know, how the structural changes that Facebook has imposed on the media, which is inextricably linked to the power of political parties, is what enabled the rise of Trump, for example, right? And, you know, that was very much a in my wheelhouse of what I write about, but it was also a deeply sort of like

• 3:25Speaker 00

  political, you know, piece, not a partisan piece, but just kind of like a political science more sort of piece. And so that's definitely kind of a cool thing about being where I'm at. And I think just kind of backing up broadly, I view stratechery as sort of my personal intellectual journal in many respects of trying to understand the world and how it works. And I start from technology, I start with technology lens. But again, just the nature of the industry fortunately aligns well with my sort of personal interest and desire to to understand a whole bunch of things, not just not just Google or Apple or Facebook.

• 4:01Shane Parrish?

  How did you get interested in tech? I mean, you worked at Microsoft, you worked at Apple, you worked at Automattic. Like, where did this sort of tech interest come from?

• 4:10Speaker 00

  Well, I've always been interested in technology. So I mean, going back to, you know, I remember being in, you know, the stereotypical sort of being in middle school and getting a computer and was very into it and very interested in, you know, discovering the web when it came out. And, you know, all those sorts of things, the the but also kind of like a stereotype sort of thing, I lived, you know, I my family was You know, I would say probably blue class, lower, lower white class, depends on how you define it. Um, you know, we grew up small town, Wisconsin. And, you know, no one around me had any interest or understanding about this stuff. It was really just me. But interestingly, I didn't gravitate to the sort of traditional like, uh, computer science angle

• 4:53Speaker 00

  or programming, like, should be a better way of put it. Uh, you know, I did pick up some sort of programming skills along the way, but it never sort of like gripped me the way that, you know, you often hear from other folks are in my situation. I was always much more interested in sort of the, just the broader picture, the broader implications. Uh, what, you know, and, and so that, that started from junior high school. But I think going back to my background, my family was, you know, didn't really have any sort of background. Both my parents grew up extremely poor. Uh, they, they, um, you kind of like broken, broken households. And no one was there pushing me to go into business or go into things like that. And, and so for me, the, the most obvious outcome was I would go work in academia.

• 5:37Speaker 00

  Like that, that, that was something that was visible to me and, and accessible. Um, but, but even then, you know, uh, my world was, was very small. I mean, I, for me, it was a big sort of like jump to go to the big public school, that being University of Wisconsin. I didn't even apply to like, you know, your Ivy schools or something like that. Do like that, that world wasn't even a world that I was even aware of. That was, that was even a possibility for me. And so this weird sort of juxtaposition of growing up in a very sort of like small world environment, while having this sort of innate curiosity and, and the access that the internet enabled to me to, to there's being a bigger world out there. Uh, you know, was, was kind of where, where it all started. And you could probably see, you know, reflections of that even in, in what I do today.

• 6:22Speaker 00

  And that kind of from them, I, I just always followed technology. It's always my hobby. But again, it never occurred to me to make it a, a, a career. I was just gonna, I was gonna go, you know, take a lot of classes, be, was an honor student, probably go to graduate school, uh, and, you know, maybe be, be a professor. Like that was, that was, that seemed like the thing to do. And I ended up going to Taiwan after I graduated. Thought that I would, you know, just kind of take a year, travel, see the world. And I ended up loving it here. I really enjoyed it, enjoyed being here, enjoyed the country, enjoyed the people, met a girl, you know, all the sorts, all the sorts of things. And in all along, my hobby was technology, I was obsessed with technology, always reading about it, always want to know what's going on. I'd read it all the way through college, been reading all the sites, you know,

• 7:04Speaker 00

  understanding how these, how everything worked, you know, and really a background that has benefited me greatly is I wasn't a programmer per se, although, you know, even in college, I took multiple classes and stuff like that. Like I, I, I could do it, but more just having a broader of understanding of how stuff works, like how does a computer actually work? How does the internet actually work? How, like, what is possible? What isn't possible? And, and what happened was I was in Taiwan and at some point my wife's like, "All you do in your free time is read about and obsess about technology. Why don't you go work in technology?" And I, and at this point, I'm like 27, 28 years old. I'm like, "That's probably a good idea. I should probably do that." And so that's when I went back to the States and attended business school. And with business school, I kind of had the, you know, technology's always had a sort of bias against the MBA.

• 7:48Speaker 00

  So I had certainly picked up on that, but the reason I did it was it was the sort of shortest, fastest route to legitimacy in the US job market.

• 7:55Shane Parrish?

  Right.

• 7:55Speaker 00

  And it ended up being along the way, I got a tremendous benefit from it. And perhaps because I went there with the, you know, not thinking it was going to be a, an end all be all that I ended up getting more out of it than, than most. But it worked. I mean, because of being at business school, I was introduced to, you know, recruiters, I got this opportunity at Apple to work at Apple University, which was, you know, a fantastic experience. Once you had Apple on your resume, it was easier to get more interviews. I ended up going to work at Microsoft. And, and then, you know, that, that got me sort of the foot in, but the, that, that's just where tech first showed up on my resume. Like where tech first showed up in my head, as it were, you know, goes back to middle school.

• 8:35Shane Parrish?

  Was it, was it an escape in Wisconsin or like was it a mechanism for you to kind of like zone out of the reality that you were living? Or was it something else that was just like completely engaging?

• 8:46Speaker 00

  Yeah, I had a happy childhood. I wasn't, I wasn't one of those like, I just, you know, I just gotta sort of get out of here sort of thing. You know, I, I generally had, had a happy childhood. No, no big complaints. Uh, it was, I just was genuinely interested in it. Like, I, I just found this stuff fascinating. And, you know, in like, when I was in high school was sort of the, when, when the, when the World of Web came out, and then, you know, my first year of college was, was sort of the dot com bubble really starting to take off like crazy. And, uh, you know, and all the like, we, we, you know, I, I actually had a little business in the dorms, you know, putting computers together and selling them. I mean, cause you could get like all the pieces on like valueact.com or something like that, or something, Value Mart or something. You could buy, I'm

• 9:26Speaker 00

  already sure you could buy Intel processors for like a quarter of the price. Cause all the stupid dot com bubble stuff. And so would buy all this stuff and put it together and sell it to get, to get, uh, spending money. But, so, you know, it was just, there's an aspect of, you know, the, the, my age was just, you know, there, there's a really interesting article, uh, I've linked to a few times, uh, just on Twitter about the, it's called the Oregon Trail Generation. And the idea is there's this sort of really distinct group of people around kind of five or six year range, where we grew up such that we had basically no internet stuff in our lives. And then switched to having internet lives in our lives completely. It was interesting is everyone before us, the internet sort

• 10:09Speaker 00

  of came along when they were already in, into their life, and they learned it, and a lot of them created it. But it was a different experience, whereas the ones after us grew up immersed in the internet. Whereas our sort of generation, we had a very clear delineation between before and after, and could, can remember what is, what was like to go to a payphone. Could remember what it was like to not be able to find a friend at a party. But was also young enough to become fully immersed and sort of a digitally native, as it were, well, retaining the memory of what came before.

• 11:09Speaker 02

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• 11:32Shane Parrish?

  It's quite a unique place to be. You're also operating in this, this, you, I mean, like, everybody's writing about technology and media today, but you're different. You stand out. When I talk to people consistently, it's like, oh, I read Strategery, Ben Thompson, like, he's my guy. What makes you so different? What's your, why is your take so different on this than all of these other smart, educated people who are, you know, operating in the same space, trying to provide people insight into technology?

• 12:03Speaker 00

  So when I started Strategery, it was interesting because at the time, I actually felt pretty confident about the prospects for the site. I had sort of like a five-year plan. I wanted it to be my job from, from the beginning. I thought it would take longer than it did, but I did feel there was an opportunity. And specifically, you're right, there were tons of sites writing about technology, but the vast majority, all of them, basically, were writing about technology from a, from a product perspective, from a product lens. And I thought there was a real opportunity to write about things from the other side, from the business side, from the strategic side. Like, to the extent I would write about products, it would be how does a company's business model influence the type of products it creates, or the way it thinks about them, or the way it does decision-making?

• 12:46Speaker 00

  And I thought there was a, you know, a significant void in that area that, you know, I felt pretty confident that I could fill, and I think that's, that's turned out to be the case. Where, so I think to the extent my viewpoint is unique, it's, it's the starting point is different. I start from business models. I start from trying to gain an understanding of a company's culture, you know, which I think goes back to a company's founding and, and the lessons it learns early on. And from that, look at what they do, look at what they might do, look at the products that come out. Whereas, you know, most sites start with the products, then kind of go backwards.

• 13:20Shane Parrish?

  Where did you develop the ability to pull apart the business model?

• 13:25Speaker 00

  Yeah, it's one of those things where, you know, I showed up at business school and certainly business school gave me a lot of the language to do this, but it was, it was almost like a wow, I'm actually really good at this stuff. Like this, this comes very easy and, and naturally to me. And, you know, business school, I think, was a lot more about giving me the language and specifics to, to, to, to understand this stuff. Just in general, I'm a very, very extremely, to the extreme, very systematic thinker, where I see things in systems and the way they interconnect and how, you know, one thing over here will connect the other thing over there, you know, all the way down the chain. And whereas, you know, I, I'm not a great detail person, right? When it gets into like, get zooming all the way down and getting into specifics, like I'm not great at that, which is why, you know, I think, working in corporate America,

• 14:09Speaker 00

  you know, it was challenging because on one hand, I could see where to go, what we needed to do, but I didn't know how to communicate that well. Cause I was a young whippersnapper that thought I knew everything. And on the flip side, you know, when, when you're young and just implementing stuff, you have to take care of all, all the little stuff. And that's, you know, that's a pain. If you, I'm a strong believer that anyone, their strengths are their weaknesses and they're, the, the one is the same. If you're super strong one area, you're inevitably going to be, be weak in its sort of corresponding area. And, and so I think my, my talent, such that it is, is this ability to view things systematically and to see very clearly and quickly how a business model flows through to product decisions. And I say that,

• 14:52Speaker 00

  you know, I hope with sufficient humility, knowing that just because I, I can see that, it means that there's other stuff I'm not very good at. I just, I'm just fortunate, I think, enough to have found a career and a job where that is rewarded and I can sort of minimize the other stuff, uh, my, my exposure to the other stuff, as it were.

• 15:12Shane Parrish?

  So you have a model where you release like, uh, you know, one article a week that I think is free to the world, the four articles a week to, to kind of paying content. How did you arrive at that? Was that business model driven? Like, did, how did you come up with that model of making a living?

• 15:29Speaker 00

  So I mentioned when I started that stratechery, I started stratechery with the goal of making money. And well, in the first couple of months, I was sort of figuring, you know, kind of figuring out what the post schedules would be, but quickly arrived at, I'm going to only do one or two articles a week. And the goal of it was, the reason I didn't want to write every day at the beginning, even though I was trying to build an audience, is that in the long run, I knew I wanted to have a subscription offering. And I wanted that subscription offering to be, get more. As opposed to, and it's a very subtle distinction, but I think, you know, paywalls to that day. Like, the only really person who had done the one, the one-person blog, sort of paywall thing was Andrew Sullivan. And he went from this, you know, he was publishing like crazy with an advertising-based model, which,

• 16:12Speaker 00

  the incentives are that you should publish more, not less. And then he just kind of threw a paywall up, and it worked because he had such fervent fans and such a large audience, but he never sort of adjusted his editorial strategy. He just kept pumping stuff out, and that's part of the reason why he burned out. Whereas, whereas I had the sort of luxury of starting with the knowledge of the business model I wanted to have in the future. And I always want to be a, I'm going to deliver this product consistently for free. It's going to always be there for free. And then, if you want more, you can pay to get more. So I wanted the, the feeling of paying to be a positive feeling, where you're getting, this is such great stuff, I want more, can I pay to get more, as opposed to, oh, you're being this for free, and I'm going to drop a wall on you, and tough luck, it's gone now.

• 16:56Speaker 00

  And I think, you know, obviously that, that sort of psychological impact only really applied to the earliest subscribers, but I think there's still, you know, I still hope I have that spirit sort of on the stratechery site as a whole. I don't push the paywall hard at all. A lot of people will say, wow, I didn't even know you had a product, you know, for, for, for months or years, and that's okay, because I want the, I want the sense of being, people who are exploring the site will find the paywall, they will find the content. But those are the people that I want to attract anyway, the people who are eager for more, that want to, want to read more, more things. And so, that's sort of the, that's the model as a whole. And, you know, I think a way to illustrate this is the metric that I used when figuring out when I wanted to actually launch it, was, I was looking at the number of visitors to the homepage on days that I didn't post.

• 17:41Speaker 00

  Because those were people that were searching out new content. They were going to just check or saying, did Ben post something today? And, and those were the people that were sort of my initial customers, the people that already demonstrated they were hoping that I would publish more stuff. And so, uh, and so that, that, that is the model sort of today. So today as it is, I do one free article. I do three, three additional articles a week. So, and then I do a podcast. So basically I do one piece of content a day. And it, it actually started out being much more aggressive. You know, this sort of when you start a company, you're hustling, you want, you want to make it work. So when I actually started the day update, I was doing, I was doing two free articles a week plus five daily updates plus a podcast.

• 18:21Shane Parrish?

  Oh my God.

• 18:23Speaker 00

  Yeah, that, that was pretty insane. So I pretty soon cut it down to one free article and five daily updates. Uh, then I went to one and four, and then I settled on the one and three plus a podcast a, a couple of years ago. It's, it's stayed at this level for, for a while now. And I think it's a much more sustainable sort of level. But like I said, I like, I just do one piece every day and it'd be nice to have an extra day to get, do administrative stuff and things like that. But, but I think it's a good level for now. So I'm, I'm sticking with it.

• 18:48Shane Parrish?

  So you mentioned one of the metrics you looked at was number of visitors to your site when you didn't post. What, what, what sort of metrics do you look at today to see in sort of like your relevance to people, your offering and how it's resonating?

• 19:03Speaker 00

  I honestly don't look at metrics at all, to be totally honest. I mean, I, I, every day when I send the email, I see how many people are receiving the, the update. And as long as that number is larger than it was the day before, then I figure everything's, everything's going fine. And, and certainly it's a sort of luxury. You know, the brilliant thing about sort of this subscription model is it, you're, all you have to do is keep your existing subscribers happy and everything else is going to take care of itself. Uh, like I don't need to worry, you know, about the, I mean, I stress a lot about the weekly articles, like the free ones that are usually, you know, I want them to be, I want them to be great. And they're a little harder to write because they're spread much more widely, which means your readers have less of a sort of like shared background.

• 19:44Speaker 00

  Whereas the daily update, I, I write much more, I think in a much more familiarly and, and I presume much more knowledge on the, on the side of my readers. But or at least some at least some extent of knowledge on having written to check before. Uh, and so it's a different sort of writing, a little more challenging in that regard. But but at the end of the day, what really matters is that my subscribers are happy because if they're happy, they will not cancel. And I'll just keep making money from them and they will tell their their they will tell people to sign up and. The you know, I've never done any marketing, you know, and this is, I think, a thing where the internet is. Is a huge benefit for publishers if you have this sort of model because.

• 20:23Speaker 00

  The friction for my subscribers to tell other people to try it out is zero. They can they can post on social media. They can email, they can tell folks to go go sign up and there's no sort of like it's a self serve. You walk up and your credit card. And and there you go. And um, the other thing that I do that I think is um. Maybe uh, folks don't expect is I don't have trials. And the reason I don't have a trial is one, I'm already giving away 25% of my content. Uh, if that's not enough to convince you that you should try it out, then like how is a couple extra articles really gonna make a difference? But to the, you know, I'm writing around 2000 words every day. It's a, you know, so it'd be, I think if I did a trial tomorrow, I'd get all kinds of people to sign up.

• 21:05Speaker 00

  But then they start getting this huge email every day and people are busy. They don't they don't want to read that. And then the trial's over and they're like, oh, well. I guess that wasn't worth it. Whereas, you know, there's a human sort of like the sunk cost fallacy. Once someone has given you $10. Like they're going to carve out the time because they feel like they already paid for it. They better they better do it. And what's great about that is it it it's a forcing function for for habit building. Where people get in the habit of reading it every day, using the same place on the subway or over coffee or whatever it might be. And and once they're in the habit, then they can't imagine not reading it. And and then you have that sort of subscriber for for a long time and. You know, it's absolutely the case that the my business model and my editorial content and all the different pieces of my business.

• 21:47Speaker 00

  All interact and all interact with each other. And I think that's what publishers of all of all types, whatever their business model. Have to be thinking about the your editorial strategy has to be aligned with your business strategy. Has to be designed aligned with your customer acquisition strategy. It has to be aligned with your go to market strategy. Like all they have to all be working in concert, given that the internet just makes. The competition's so much greater because you're you're quite literally competing with everyone in the world.

• 22:09Shane Parrish?

  Do people take your paid for stuff and then make it free, but in their own words?

• 22:15Speaker 00

  Oh, absolutely, absolutely all the time. I mean, that's that's something you just have to get over and and accept that's that's going to happen. I mean, there's you'll see it show up in in other columns or opinion pieces a day or two later and and, you know, not not always, but sometimes more with some pieces than others. And, you know, I think at some point, it's a little frustrating at first, but what I quickly realized was what's kind of my goal here. Like, my my goal here, and it sounds cliche, but my goal should technically is not to make money or or get rich or might be. I wanted, obviously, I wanted to to make a living and to, you know, be have a good provision for for my family. But at the end of the day, like, this is stuff that I care about and I'm passionate about. And the the opportunity to literally spend every day thinking and writing about

• 23:00Speaker 00

  stuff that I'm really fascinated and interested about is a tremendous privilege. And so to the extent that I am influencing other people to also write similar things that that I've written in similar lines, that's actually a tremendous, that's a tremendous outcome, because it shows that, you know, you can never have, you know, the brilliance of the business model is the way it scales on the back end, right? The amount of work I do for one subscriber is the amount of work I do for a hundred subscribers. But the way to truly scale, to truly have impact is not is not to just influence the people who read you directly. It's to influence the influencers, as it were, and and to and so to the extent that people do echo themes that I've written about, that's actually

• 23:44Speaker 00

  if my goal is is to have a positive change and not to sort of feed my ego and not to be credited, then it's actually a tremendous thing.

• 23:55Shane Parrish?

  We have very similar sort of business models. When you mentioned that you kind of didn't promote, and you know, that resonates with us because we also have like a membership site. We don't really promote it. People are surprised when they find it and it's extra. It's not like we cut you off and then we sell you something. One of the differences when I was doing some research between you and I is you offer a monthly, whereas we only offer a yearly. Why do you, why do you offer a monthly?

• 24:23Speaker 00

  Well, I mean, I already don't offer a trial. I think monthly gives you a, a way in that, you know, is pretty accessible. It's, you know, it's $10. Like it's, it's kind of on the edge of, fine, I'll give it a try. Sort of territory. And, and actually what happens is, you know, the people will try for a month and a lot of people will sign up and immediately cancel their auto renew because like I'm just trying it out. I don't, I don't want to get charged again. And that's fine. So, but it means when I look at churn numbers, I need to like exclude the one month folks because they, they kind of mess it up. But what, what happens is a lot of times is people start out with a month and then they switch to a year because they're like, oh, this is great. Of course I'm going to keep getting this. And a year happens to be, you know, $20 cheaper because, you know, $100 a year. So, um, so, so I think it's just

• 25:06Speaker 00

  an easier, more accessible entry point. And, you know, I feel, you know, over time, you know, I see people moving, more people go from monthly to annual than I think churn out by and large. And, you know, at this point, for a long time, they're actually 50/50. But at this point, my, my annual membership is actually a fair bit larger than my monthly membership. And I think that's great.

• 25:27Shane Parrish?

  Yeah, that's awesome. What's your day like now? Like what, walk me through, like you wake up. Uh, I want to know kind of like what it looks like in a broad strokes, but also what are your habits, your routines? And then I want to like deep dive on some of like how you read content, how you consume information.

• 25:45Speaker 00

  I wake up and I deal with this, with this super annoying puppy.

• 25:52Speaker 00

  And then make, make, make breakfast for, for my daughter, walk her to school, uh, come back. You know, my, my son, my son grabs, grabs a bus. And then, um, and then I sit down and I have a meeting. So I now have like a, someone that assists me with some of the, a lot of the administrative stuff. And so that's usually the first thing because he's based in the U S. And so the, given the time zone sort of alignment, the, that's the first like hour or two of my day is, is just dealing with administrative stuff. Which isn't great. It's kind of a, sometimes a pain to dive right into it. It's kind of just a matter of, of time zone that it has to be first. But that, that's usually what happens.

• 26:28Speaker 00

  And then, uh, and then be, then after that, once we're done, you know, I, uh, theoretically I dive into, you know, research and planning from daily update and work diligently. Uh, usually it's, it's a much more sort of a winding road where I'm reading stuff and I'm on Twitter and I'm floating around. And I think, you know, I'm usually thinking about, you know, one thing I do very early, right? When I wake up is I do look at all the headlines and if that happened the day before. And, and so kind of ongoing through my head is, is an outline of what I'm probably going to write about that day. And, and this is where also the, the other distinction is weekly updates. I, I usually have an idea to write about for a weekly update, oh, quite a while in advance. Like I knew this week I was probably write about Zuckerberg in, in, in Congress, you know, a while ago.

• 27:11Speaker 00

  Uh, you know, the case of Mike, I wrote about Microsoft last week and the reorganization, like the reorganization happened on a Thursday. And so I knew I would write about the following week. And so usually I'm thinking about those for, for several days ahead of times. I usually already know which day I'm going to write them. And so those, those days are different. The daily update is usually more responsive to what happened the day before. Uh, and again, not always, I always have a sort of like a list of stuff that's going on, uh, such that it's, what if nothing happened? I can go back to it or two, a bunch happened one day and there's multiple things I want to cover. You know, I'll take a few days to get over everything. Uh, so, so again, the days vary a little bit, but usually I want to have an idea of what I'm writing about. And then it's kind of percolating. So I, I'm, it's kind of in the back of my mind. I'm thinking about it. What were the points I'm going to make?

• 27:53Speaker 00

  And that middle part of the day is spent sort of fleshing it out, making sure I have the angle, you know, the, the, what I'm going to write about generally. And then, you know, sometime in the early to mid afternoon, uh, I receive the necessary sort of dose of sheer panic and terror that I have a deadline coming up in three, three or four hours. And I better buckle down and start writing. Uh, and, and so then I spend the, the afternoon and early evening writing and my goal is to publish by seven o'clock, uh, or my goal is six o'clock, usually ends up being closer to seven o'clock. Uh, and then go have dinner, you know, hang out with the kids, play with the dog. And, uh, and then go to bed and do it again the next day.

• 28:34Shane Parrish?

  It's a fascinating approach. So you, you never have writer's block like, cause you always have this list. Is that list ever empty?

• 28:41Speaker 00

  Well, I think the, uh, I think the most common misconception people have about what I do, especially given the amount of things I write about is, um, it's not like every day you're starting from nothing and kind of scratching together an opinion on stuff that goes on. Like I have a view of the world. I have a, you know, the way I think that things work. It's a sort of like mental model in my head of, and, and so things happen. I kind of pass them through that model and if, and most of the time they fit the model and that's, it's easy to write about it. Like I, I, it's pretty easy to see what's going on here. Sometimes they don't, and usually that means there's something else going on. There's like, oh, maybe something else is going to happen soon or, or sometimes I'm wrong.

• 29:24Speaker 00

  And when I'm wrong is arguably the most interesting and the spur of, of a lot of weekly articles where it's really sort of modifying the model, like expanding and better articulating my sort of view of the world. And so I think from my perspective, uh, It's it's less the coming up with opinions that is difficult and more the trying to keep a very strong sort of guard up against like confirmation bias where where things happen and oh that that fits my view of the world. That must be true. Whereas making sure you always take the time to go back and say, wait, let me double check. Make sure this is right because it would be awfully easy to to follow this or say something. Oh, that must be wrong. Well, maybe no, maybe it's

• 30:09Speaker 00

  right. Maybe I'm wrong. And so I think it's more about the discipline of avoiding confirmation biases. I think that the the bigger challenge as opposed to consistently coming up with with things to write about.

• 30:20Shane Parrish?

  How much pressure do you have to agree with things you've already written about versus going the world's changed or something is different and I was wrong? Like, when's the last time you came out and were like, I was completely wrong. I blew this. And how was that mentally?

• 30:34Speaker 00

  All the time. I did. I did it a couple of weeks ago. And actually, it turned out, I think I was probably right. But but the no, I do it all the time. And I think a strong commitment to that is is is critical and key to to what I do. Like, so it's key in a few areas. So so one, it's very free. A friend of mine once said, I love to be right, which is why I always say when I'm wrong, because that's the fastest and shortest way to be right.

• 31:00Shane Parrish?

  I like that. Yeah.

• 31:01Speaker 00

  So so one, if you want to be right, like, admit you're wrong. Number two, I write with a fairly sort of authoritative tone and voice, just because that's better writing in general. And also, I'm saying what I think. But, you know, the cliche, strong opinions, weakly held is exactly what I abide by. Like, I I'm gonna pursue what I believe to be true, and I'm gonna always be testing the assumptions and underlying it. And again, this is where the sort of having a systematic sort of view of the world is very beneficial, because it's it's sort of my innate nature to always be challenging the assumptions that are underlying something as opposed to just looking at the the sort of outcomes. And then the other end, you know, it aligns my business model. Like, people are paying me money because they think what I read is what I write is worth reading. And from that

• 31:45Speaker 00

  perspective, for me to come out and say, I got this wrong. And not only that, every time I get something wrong, I always try to Recount what I was thinking when I got it wrong, what led me to make a mistake. And probably sixty percent of the time it's confirmation bias. I will come out and say, I got this wrong because of confirmation bias. I was looking, I presumed it would be this and I didn't consider this and this is why it was wrong. And you ask my readers, like you could probably do a search for confirmation bias, you'll get several examples of me saying where I got it wrong. Other times, yeah, circumstances change or or um or other, you know, sometimes circumstances change because I wasn't wrong, but my opinion changed. A lot of times, things I get wrong are issues of timing. Like where I can see structurally why a company is facing a particular issue,

• 32:28Speaker 00

  but I maybe don't appreciate the extent to which their current route has lots of legs in it, right? So what I say is correct, it's just not going to be correct until like 2020. But you know, that's no excuse because to be wrong in timing is is to be wrong. But uh, but no, I am wrong all the time and I relish the opportunity to say when I'm wrong. And is it painful? Sometimes it's painful. Uh, it certainly is. I think there was um, probably one of my more painful ones was uh, like the Snapchat spectacles thing. It was painful one because there's there was a few people that just always kind of rubbed it my face constantly. And so it's always irritating. It's like, yes, you were right, I was wrong. But it was also painful because it was one of those things where uh, I knew better, like I should have known better. And those are the most irritating ones. Where it

• 33:13Speaker 00

  wasn't even a confirmation bias thing. It was it was a, I kind of fell in love with my own sort of theory. And the theory wasn't wrong. It was just misapplied, I think, in that particular case. And and those are the irritating ones. But at the same time, you know, if I don't come out and say that, say, this is why I got it wrong. I did this. I made this mistake. Then why should people trust me or pay me money to to read what I have to say?

• 33:36Shane Parrish?

  Completely agree with that, that line of reasoning. How do you filter what you read? Like the information that goes in, you said you wake up, you kind of read the headlines. Like what is it? What are your trusted sources? If you're other people's trusted sources?

• 33:50Speaker 00

  Yeah, so I very much, I started sort of like first principles by which I, in the case of content, by which I mean like just news. Like, so I, I read, uh, like, so I wake up, I open up Techmeme, like, just like, where are the, where are the headlines of the day? And when I'm reading something, I try to get into like original sources as much as possible. Um, sometimes if something comes up, I will try to find like more opinion analysis pieces that have written about it, more just because I find a useful way. It's like a knife sharper where it, it prompts me to think through my own sort of view. But, but, uh, usually by and large, I form my opinions directly from the sort of the, the core content. And so people always like, oh, who are the writers you read or whatever?

• 34:31Speaker 00

  Usually if I read other writers, it's more as a happenstance of researching a particular topic. That what I actually read on a day-to-day basis is just news, like, like what is actually happening? And in, in, you know, and then in the context of writing a daily update, I will do extensive amounts of research. Like, I mean, my typical day, I end with like 150 browser tabs of Finn, right? I have an iMac with 40 gigabytes of RAM because I have so many browser, browser, sheerly for handling browser tabs. That was gonna be my question for you. I was gonna see how many browser tabs you had opened. Oh, hundreds, hundred, every day. Like, when I write about stuff, I want to, it's really important to me to get everything right down to the details. Because I see, you see things like, like, for example, like Mark Zuckerberg in Congress this week.

• 35:13Speaker 00

  And he was let off the hook on at least three occasions in the Senate, and, and I had an economy times in the House, because people talked about Facebook selling data. Well, Facebook doesn't sell data. Like, is Facebook's handling of data A-OK? Of course not. But if you are not precise and understand exactly how the business works, then your analysis may be right in spirit, but it's, it's not right because the details are wrong. And, and more importantly, the people that matter are not going to hear what you have to say because they're gonna get caught up on the details. And so for me, getting the details right is critical, uh, not just to make sure my analysis is right, but to make sure that people will hear the analysis. Because people won't hear what you have to say if you get details wrong, even if those details don't matter.

• 35:56Speaker 00

  So to me, getting stuff right is really important, it, it, just from a sort of A rhetorical standpoint, but then also like I, I want to know, I, I, I don't want to say stuff that I don't think I understand. And, and sometimes it's things like, um, like I wrote an article about, about GPUs like a, a year ago. I remember this one, I was, I was really proud of in part because I knew how they worked at a sort of high level. But to me, that was a great example where I really got down into the weeds on understanding a very granular level, how they work. And, and to my mind, that was a, that was an example of a, of, of a daily article where it read like any other daily update. But there, there were hours of research that went into that to make it feel like just another daily update. And, you know, I think the, my absolute favorite compliments that I get from people is when people in other fields are like,

• 36:42Speaker 00

  this is the first time someone's actually written something about this field that understands how it works, you know, like, uh, and, and those are gratifying because it shows that the time I put in to make sure I got the details right were worth it. And, and I think, you know, and I think that's the, that's the flip part too, that was saying when you're wrong. Like if you say when you're wrong and you put in the time to get the details right the rest of the time, that's the best way to sort of build sort of trust and reputation i- in the long run. You know, there's always a, a challenge about a broad based sort of publication where it's like, oh, this publication is really great. They always have, they always know what they're talking about and then they write about the field that you're in. And if they get the details wrong, it's like, wait, I know about this one. They're getting it wrong and you start to question everything else.

• 37:25Speaker 00

  And so to me, it, it, it's so important to take the time to get the details right.

• 37:30Shane Parrish?

  There's so many things I want to go into there, like let, let, let's rewind a little bit to Facebook. Like to what extent do you think these people are asking questions based on what they believe? Or based on what they believe their constituents believe and it's posturing or signaling?

• 37:45Speaker 00

  I mean, I, the, Facebook is an entire morass there. I think, I think the, the part of the challenge with Facebook currently is I think there's an aspect where Facebook is a bit of a scapegoat for the, the last election, but, and I think Facebook is very attuned to that and feels resentful about that. But that doesn't change the fact that Facebook did a lot of bad things. And, you know, I actually think Facebook is responsible for the last election, not because of Russian ads or fake news, but because of the, you know, I kind of. earlier, the way they fundamentally changed the structure of politics and media in America. But that's that's a very different sort of cause. And so, you know, it's hard to, um, I think it's a challenging to to pull apart. What are the causes here?

• 38:27Speaker 00

  And I think it's such a challenge just in general, not Facebook is probably the most prominent example, particularly currently, but by and large to sort of break out of your bubble. And, you know, and it feels like the bubble has gotten so much stronger and more pervasive, particularly since the last election. And, you know, I think to this point, I'm grateful for one, having grown up in the sort of environment that I did, because I feel at least more aware of the just, I mean, imagine growing up and not even knowing that you should apply to like to like Harvard or something like that. Was me like, and I think that's a mindset and a view of the world that most people that I deal with on a day to day basis

• 39:08Speaker 00

  can't even fathom like, like to grow up in that sort of, but that's the experience of a lot of people. That's one, but then two, on a day to day basis, to not be in San Francisco, to not be immersed in tech in a sort of environmental basis, but to be, you know, living abroad, living in a different country, talking to people who mostly aren't really interested or don't really care that much. I think is tremendously, you know, there are certainly downsides, many of which are ameliorated by the internet, which, you know, things like Twitter and messaging that lets you stay in touch with people. Uh, but there are tremendous upsides, which is being on the sort of outside looking in brings, I think, a lot of clarity and skepticism, I think, probably more than anything.

• 39:51Shane Parrish?

  You probably see the system better than anybody because you're outside of it, right? You're not a part of it and you don't have these nudges to see only what's right in front of you.

• 40:00Speaker 00

  Yeah, I mean, and like I said, everything is a strength and a weakness, you know? So I'm less in touch with the details and the day to day by just by definition, because I'm not immersed in it. But but the payoff is, yeah, being on the outside looking in. And and that happens to align with, again, my sort of natural way to view the world. So again, I think it's another, it's another area where my life and sort of business model is in alignment, I think, to to sort of my benefit.

• 40:28Speaker 03

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• 41:22Shane Parrish?

  Two questions I want to follow up on before we get back to kind of like your habits, which one is like, okay, so tell me about Facebook and how they had an effect on the election because I don't think anybody listening, or not everybody listening, will be familiar with your work. And the second is, talk to me about this information bubble that we're in.

• 41:42Speaker 00

  Well, I mean, my theory with Facebook is there's that famous book, The Party Decides, and that was sort of the theories in that kind of drove, like Nate Silver, for example, to ignore his own polling data and to say that Trump wasn't going anywhere. And the sort of thesis of that book, The Party Decides, is that after the sort of like democratic reforms of the parties of the presidential nomination process in the 60s and 70s, I mean, it used to be like a smoky room. Like in a smoky room, they would go choose the presidential nominee. But then there was this push to be more democratic. I think particularly the democratic side after, was it Herbert Hoover was sort of just like picked out of nowhere? And the thesis of the book is that, yes, it became more democratic with the primary and caucuses and all those sorts of things.

• 42:26Speaker 00

  But it actually was still the parties deciding who is the presidential nominee. And their point was the party is not like politicians. The party is all the broad sort of interest groups and donors and activists who are care about outcomes and their collective sort of preferences drive this is me. Because they're the ones that actually do stuff. They actually do the work. They actually pay the money. They actually do all this sort of stuff. And they will, they will make the selection.

• 42:58Speaker 00

  By virtue of there only being a possible selection, which means only some candidates would get money, only some candidates would get the sort of necessary support, only some candidates get the sort of media coverage that's driven by all sorts of other things that is necessary to even make a presidential run. And I think what was implicit in that and what was missed and underappreciated is all that sort of implicit power, no longer explicit power, but implicit power was inextricably tied up to the gate holders, gatekeepers in media. In that to, in order to get your name out, you needed money for advertising, or you needed earned media, what's called, where the newspapers would write about you and television stations would cover you and all those sorts of things. And that only happened if you were in a position that was enabled by sort of the party, again,

• 43:43Speaker 00

  the party speaking broadly, not just the politicians. And so people would vote in primaries, but they were always voting for broadly acceptable candidates to the sort of party as a whole. And so that's kind of part one. Part two is, what has happened to the media over the last 20 years? The media has completely lost its sort of gatekeeper status. The media was predicated on controlling, the media was not predicated on writing content that people wanted to read, they're predicated on owning printing presses and owning delivery trucks.

• 44:11Shane Parrish?

  They own the mechanism for delivery.

• 44:13Speaker 00

  Exactly. And so what the internet did is completely made all that obsolete. And the internet made distribution costs zero, made transaction costs zero, made it possible for anyone to go anywhere to read anything, and basically destroyed the power on which those gatekeeper functions rested. And so what happened was, the media completely switched to being, from being a gatekeeper to being a subservient supplier to platforms like Google and Facebook, where they had to go on the platforms according to the platform's dictates and could compete for readers according to the way they were allowed, which is by clicks or getting attention or whatever it might be, as opposed to being, we are sort of like, we own the printing presses, you

• 44:58Speaker 00

  will read what we have to say. And so the implication of that is, once the media lost its power and its gatekeeper status, the parties, at the same time, because- They were inextricably tied to the media, lost their power and gatekeeping status. And no one sort of realized this happened until really Obama came along and came out of nowhere and totally overwhelmed the party's choice, which was Clinton. And he did it through grassroots, through being someone that broke through and people were attracted to. And then Trump took it up to 11. No one in the party establishment wanted him or supported him. But he had celebrity, he had attraction. And why did the news cover Trump? The news didn't make Trump. The news covered Trump because people wanted to see more Trump.

• 45:39Speaker 00

  They wanted, and so the news in media organizations were responding to the incentives that they had in a world where they were no longer gatekeepers. They were sort of serfs in Google and Facebook's kingdoms. And what else would they do? If they didn't cover Trump, someone else would, and that's where the audience would go. And so, and so this is the, this is the effect that Facebook had in, in Trump being elected. Is by virtue of being the mechanism by which media and media entities lost a sort of gatekeeper status of what was acceptable, what was not acceptable. They were by extension the mechanism by which political parties lost their sort of controlling function, such that no one could control it. And, and, and once no one could control it, it, it laid this, the groundwork for, for Trump to come along

• 46:24Speaker 00

  and, and, and be nominated and be elected, which is what the actual voters wanted. You know, whether you agree with it or not, even though the party didn't want that. And so it, it, it just flipped it around on its head.

• 46:36Shane Parrish?

  Do you think we're going to see more sort of implications along these lines as technology continues to expand its role and ubiquity in our lives?

• 46:45Speaker 00

  Unquestionably. I mean, the, the, we are switching from a world where it used to be a world where market power and, and economic power and social power was gained by controlling supply.

• 46:59Speaker 00

  To a new world where where power is gained by controlling demand. The fundamental difference between, let's say, a newspaper previously that controlled the printing presses and Facebook is that Facebook has the users such that suppliers, and this being content organizations, these organizations have no choice but to go to users on Facebook's terms. A great example is Google. Google is kind of the king of what I call these sort of aggregators. Like, what do, what does any website do? What do I do? What do you do? What does the New York Times do? What does anyone do? They put up a, a map of their website that, according to Google's terms, that, that makes their site easier for, for Google to understand and to put in a search index. Right?

• 47:41Speaker 00

  Like, we are all doing work on Google's behalf to make Google's service better. That is because Google controls demand. They control the, the customer in where they enter the internet. And that's a, a perfect example of how controlling demand is the true locus of power going forward, not controlling supply.

• 48:01Shane Parrish?

  Do you think that's sticky? Or do you think that there'll, there'll be these, like, Google came, came out of nowhere to where they are today? And, you know, like, do you think?

• 48:11Speaker 00

  Because there, there, there, you, there's multiple virtuous cycles going on. So in the case of Google, you have, you, they have a data network advantage, which is the more people search, the more data and results they get on what searches work, what searches don't, people's preferences. It makes the search results better. So, so there, there's, there's one network effect there where the more people that use Google, the better Google gets. And if you had two search engines and they had, they started out with identical technology and one had 51% share, one had 49% share. Over time, the 51% share would grow and would improve just because they have a data advantage. So that's number one. Number two is you get a two-sided network effect where the more users, the users come to a platform initially because it has a great user experience or it fits their specific need.

• 48:53Speaker 00

  And those users give that, that aggregator power over suppliers. Such as suppliers will come onto their platform on the aggregator's terms. You can see this with, with Google, with Facebook, you can see it with Netflix, for example, where, where they go there to get access to the customers. And that makes the offering more attractive to end users, such that they get more users. And you get more users, now you have more power over suppliers.

• 49:15Shane Parrish?

  More attractive platform.

• 49:16Speaker 00

  Exactly. And so you get a virtuous cycle. And so the, sort of the, and you're seeing this play out where the, sort of the end game of Controlling demand and because again, the two key things are there being zero distribution costs, which means you can you can pull all suppliers of all types on your platform and reach all customers at effectively zero marginal costs. Whereas it used to be, you know, to to print a newspaper and deliver it to doorstep that that costs money such that a newspaper couldn't scale infinitely. Google can scale infinitely and there's no transaction costs. Like it, Google can legitimately serve every person in the world. Facebook can legitimately serve two billion people like there's no way any business with any sort of marginal costs could ever serve two billion people. And so it's the fact that there are no marginal costs is a consequence of the internet.

• 50:01Speaker 00

  And you know, the thing with internet, the thing with with business school is always very critical. I remember going to business school and a strategy class and there was no classes about like the internet that involved internet companies. And I went to the professor, I'm like, how can you have a strategy class with without anything about the internet like, oh, well, the thing about strategy and the in doing case studies is you learn these broad principles that can be applied. And it's bullshit because it's true. But what the internet has effectively done is if you think there's like a this big complex math equation, if you put a zero into that equation, like the whole thing kind of blows up, right? Like you can still use the equation and with zeros in it, but it's most people don't think that way. They they can't think through all the implications.

• 50:44Speaker 00

  And so again, my sort of systematic view of the world sort of let me sort of figure out what happens if you put a zero in this equation. What are the implications of that? But a lot of what I write about with with aggregation theory is is, oh, hey, this equation, let's let's lose the equation. Let's go through to the simplified equation, which is looks completely different than the equation came before because after the zeros are there, like it looks totally different. And now, how does this actually apply to the real world? How can this actually apply to your business in this your industry and things along those lines?

• 51:12Shane Parrish?

  What would you teach an MBA strategy class for internet strategy? If you came in to to give a lecture on internet strategy, what would be the core ideas of that sort of lecture?

• 51:24Speaker 00

  I think the the the most important takeaway would be, I'm sure I could do case studies about the different industries and companies, but I think the the more important thing is is the examining the implications of changing assumptions. Like, what what happens when you start with start with zero marginal costs? And and I would probably want to go through different industries and show how, when you change the assumptions, the implication for that business and what is attractive completely changes. Like, like, take, like, CPG companies, like, Consumer Packaged Goods, which is a huge focus at Kellogg, where I went to went to school. And the these sort of companies, they were predicated, the single most important thing to understand about a CPG company, is that their their most important sort of strategic

• 52:09Speaker 00

  tool was shelf space. Like, if you control shelf space, then what you do, you then you you do R and D to get like, sort of, they invest a lot of R and D to get marginally better products, then they would run a bunch of TV advertising, reaching the lowest condo denominator, and they'd go to the store, and it would be a brand extension where they'd be next to the Tide detergent, because, oh, if a grocery store owner, if you want Tide detergent, you better carry this brand extension next to it. And then they would be there, and you'd buy it. And that's how they would drive growth. And if you think about it, if you have a strategy, and this is obviously dramatically simplified, but if you have a strategy that is quite literally predicated on physical space, that probably is not going to be a very, like, if you do the thing with the internet, what happens if there are no

• 52:48Speaker 00

  shelves? And if you start with no shelves, everything changes. It turns out that brand actually, brand already mattered, but brand matters more in a different way on the internet, where it used to be, a brand mattered from a recognition perspective, like, recognition perspective. Like, you're in the grocery store, oh, I need some deodorant, you and you're looking at a shelf with like, 20 kinds of deodorant. Why do you pick the one that you pick? Most people don't know, but but a lot of it has to do with advertising and and sort of implied preference and things that they've picked up over time. Whereas on, if you go to Amazon for deodorant, you search for deodorant, you search for Old Spice, or you search for Reicart, which means the recollection of a specific brand name is much more important than the sort of recognition of a brand, if that makes sense, which means your advertising

• 53:33Speaker 00

  strategy needs to be Be different. All those things need, like, everything you do about your business needs to be different. You probably want fewer brand extension and more investment in a sort of like standout sort of thing. And you have to deal with competitors that are super niche focused. Cause the internet enables niche in an unbelievable sort of way. I mean, like, our businesses are examples of that. And so, and so my point would not, so if I were to, to guest lecture in an MBA program, I would not, maybe I would use CPG as a case study, but my goal would be you need to learn to consistently and repeatedly start with new assumptions. Like, what is the controlling assumption in this industry? What happens if that controlling assumption goes to completely changes?

• 54:18Speaker 00

  Here's another example. Hotels. Like, if you're trying to figure out, what is the most important thing for a hotel traditionally? It's, it's the name on the sign. Why? You are going to go and close your eyes in a strange place and you need to feel safe. And so if you don't feel safe, if you don't feel like that it's a place that is trustworthy, it doesn't matter, location doesn't matter, amenities don't matter, uh, you know, all, all the, the quality of the sheets don't matter. Like, nothing matters unless that, that one priority is taken care of. And, and so what, what Airbnb, for example, did was it, it took that trust, which is very hard to build and develop and, and companies would spend, you know, hundreds of millions of dollars and lots of time on building brands.

• 55:00Speaker 00

  They, they basically digitized trust to being this sort of reputation system and ratings and things like that. Again, crib from like eBay, for example, eBay is a huge pioneer in lots of this stuff. But, but they digitized trust and, and what that did was it didn't make trust not matter. What it did was it lowered trust from being the only thing that matters to being one of many things that matter, along with maybe I want a kitchen, maybe I want to live in a particular neighborhood. Maybe I want to do all these sorts of things. And, and that's just, you could see this in industry after industry where, where the assumptions fundamentally change. And so, again, the, the lesson I would want to impart is, is how can you train yourself to question and look at assumptions, because most people don't. They, they, they, they, they stay on the surface.

• 55:45Shane Parrish?

  You mentioned the shelf space. I think that's super interesting. You go to Amazon, you search for deodorant, but you also have this weird thing where if you're not in a physical store, I mean, when you reach for a product in a physical store, even if you're searching for it, it's there. But on the internet, you could reach for deodorant on Amazon and it can show you like six deodorants before you get to the one you want, even if you're searching by the brand name.

• 56:08Speaker 00

  Yeah, I think that's a mistake by the brands. Like it should, like they have too many versions, too many variations, and that's a problem, I think, of the world that came before. And I think, you know, the, all these brands and so much of the sort of modern economy was built on this like mass market, lowest content on it or sort of model, where you're going to watch the big sports game that everybody watches, and you're gonna see the commercial for the big beer, or the big deodorant, or the big whatever it might be that everyone sees. And you're gonna drive your, your big car to a big box retailer, and you're gonna bump into it on the shelf, you're gonna grab it, you're gonna go home. And, and, and every single piece of that story that I just told is being fundamentally disrupted by the internet.

• 56:52Speaker 00

  You know, sports, like the, the shared experience of, of watching a football game, certainly still strong, and, and there's a reason why it's still valuable and it still drives a lot of, you know, particularly the bundle and things on those lines. But there's so many more things to watch. There's esports, there's, there's Reddit, there's, you know, listening to podcasts. Like, there's so many more outlets for free time that that is inevitably gonna weaken over time. The, the, you see the driving a car, well, or maybe you're, you're gonna take an Uber, or maybe you're gonna ride a bus, or maybe you're, you're gonna, the fundamental nature of our cities is going to slowly transform as new forms of transportation become viable. Big box retailers, well, what about just going to Amazon? What about searching for it? Uh, you know, a lowest content or brand that sort of applies.

• 57:35Speaker 00

  What about the micro brand that can target me on Facebook or Instagram because it understands who I am and what it's trying to buy? And like, oh, that's actually really interesting. And they can reach me spending a fraction of the price that these companies spend to, to, to do these mass market advertising. But the implication of being very niche is they can be much more specialized, like, like. If you don't have to bear huge fixed costs of being on shelf space and running TV ads, you can you can spend that money on building a better product that appeals to a narrower segment and charge more. And now I'm buying, you know, my custom, you know, my custom deodorant that's meant for men in the Oregon Trail generation. And and I I'm lost as a customer for P and G kind of kind of completely.

• 58:19Speaker 00

  And there's no real way to get me back.

• 58:21Shane Parrish?

  So I I'm like the board of Heinz, we bring you in. What do you tell us? What do you tell us about what we're doing wrong and what we should be doing differently then? Other than

• 58:31Speaker 00

  I say I say you're you're owned you're owned by Warren Buffett, so you should probably do what he says.

• 58:37Shane Parrish?

  But that's a prototypical example of a CPG company, right? Like, how would you tangibly, other than reduce brand extensions and invest in brand? Like, how is the internet changing that business in your eyes?

• 58:50Speaker 00

  I think I think you just I think you just said it. I think that the internet has a barbell effect where there are returns to the biggest and returns to the smallest. And if you're stuck in the middle, it's just a very dangerous sort of sort of place to be. And so if I were Heinz, I would double down on on Heinz and the Heinz brand. And I would seek to dominate even further all the traditional distribution channels that I do, whether that be restaurants, whether that be schools, or you know, all this sort of like the B to B sort of selling space, because that's going to be a space where being big and bringing to bear your assets is going to be much more impactful than the sort of consumer space where it's getting more challenging. So so if I were so that that would be another aspect of what I would do.

• 59:33Speaker 00

  And and you know, and and and I think that that's probably relatively consistent advice. But but, you know, certainly it's going to be, I think Heinz is probably better shaped than a lot of folks, to be honest, because, you know, did you read that New York article about trying to invent new kinds of ketchup?

• 59:49Shane Parrish?

  No.

• 59:50Speaker 00

  Oh, it's a classic. It's one of those Gladwell pieces from a few years ago. But it turns out it's really hard to improve on Heinz, which is which is a good place to be. But but yeah, but no, I think, but yeah, I think the thinking about your go to market, your your target customers, what your brand is, is it worth doubling down on? Can you do extensions? What makes sense? Oh, yeah, all those are are going to be key questions.

• 1:00:12Shane Parrish?

  You mentioned controlling demand is kind of the future. Who do you think and why has a better controlling demand position in a relative basis between not only now, but going forward between Google, Facebook and maybe Amazon?

• 1:00:27Speaker 00

  Well, I think they're in pretty distinct categories, I think, going forward in that, you know, Amazon is clearly focused on, from a consumer perspective anyway, on they want to be where you buy everything. And kind of the one stop shop and you're, if you want something to buy, you should just go to Amazon. Even bother going anywhere else. And they've been, you know, very effective in that regard. Google, if you want to know something, you go to Google. And Facebook is, Facebook is where you waste time. And that is a surprisingly valuable thing to be where you waste time. Because in part because, one, people have a lot of time to waste, more than they think.

• 1:01:10Speaker 00

  And mobile has really unlocked huge amounts of new places for people to waste time. You know, whether it be waiting for the bus, you know, going to the bathroom, whatever it might be. There's lots of places where time wastes time. And the other thing, and the good thing about wasting time is that is one of the most attractive and compelling places to advertise. Because when you are focused, like Google is about focus. Like I want this thing and Google's going to help me find it. And to that extent, Google's search ads are very compelling because they are helping you find the thing that you want. And it's really a win-win, you know, sort of thing. Whereas what about the things that you don't know that you want, that you don't know about, that you're not aware of that even exist? And if you're in a focused state where your attention is, you're thinking about one thing,

• 1:01:53Speaker 00

  you're not open to new things, to new ideas, to new things coming in. You're much more open when your mind's kind of shut off, when you're just absently scrolling through your Facebook feed or through Instagram. And so Facebook is actually an incredibly powerful advertising platform for precisely that reason. Because the mental state that people are in when they're on Facebook is different than the one they're in when they're on Google, for example, or even on Amazon. The other thing to think about in this case and why those are the kind of the big companies is you have to think about from an advertiser's perspective as well. Advertisers think about it from an ROI. Everyone thinks about the R. What's the return? Like, how many, like, how many purchases do I get from this app? But the I matters as well. Like, how much work do I have to do to get this app out there? Like, do I have to learn the platform? Do I have to invest?

• 1:02:38Speaker 00

  Do I have to make special creative for it? And this is where Instagram is such a, is such a powerful tool for, for Facebook in that if you want to reach, say, teenagers. Maybe Snapchat is a better way to reach teenagers and Instagram is only 80% as good, but you're already buying Facebook ads. You're already on the platform. And the background tools are so much better. Yeah, that the I overwhelms whatever R advantage Snapchat might have. And so the real sort of problematic angle to Google and Facebook is less the consumer front end and more the advertiser back end, such that it's not really viable to build a, a mass market advertising business in the, in the current, current day because Facebook and Google are so dominant. Which company would you rather be? Uh, I, I don't know.

• 1:03:23Speaker 00

  I mean, I think, uh, I mean, probably, I mean, Google has one of the most perfect models of all time, in, in, in part because they're such a perfect aggregator. Where Google, Google's goal is to know everything and the nature of their model is that everyone voluntarily gives them everything. Like, users go and literally tell Google, like, you go to Google. What they want. Advertise me shoes, right? Yeah, yeah. Now, they're not saying advertise shoes. They're saying, they're searching for shoes, but like, it couldn't be clearer what they're going for, right? Like, uh, uh, Google certainly has a ton of data on you and they do do targeting and all those sorts of things. But at the end of the day, the most powerful piece of targeting Google has is what you tell them in their search box. And, and if all targeting and data collection went away tomorrow, Google would still be in fantastic shape.

• 1:04:06Speaker 00

  Uh, uh, and on the backside, you know, like, all the suppliers, the websites and all those things, they give Google all their data. Google's like, oh, we have a new format for recipes. Put your, put, put your recipes in, in our format. And everyone's like, okay, we'll do your format. Like, because, why? Because, you know, it's a win-win-win sort of situation. Uh, and, you know, in the long run, Google, when we move to voice, is their business model going to make sense? They have challenges certainly going forward. Google's, again, less attractive for the sort of brand advertising, although YouTube is obviously a massive. A massive advantage in this case, you know, Amazon, there's a, it's, it's pretty straightforward. Like you, you buy from Amazon and they'll take a skim off it and, and they're shifting more and more to being a platform model where third parties on Amazon.

• 1:04:46Speaker 00

  And the third parties pay Amazon to put their stuff in Amazon's warehouses and then they give Amazon a percentage of the sale and Amazon is just facilitating it. Again, all because they own the storefront, they own the customer relationship. Uh, you know, so Facebook is probably the least attractive just because, you know, the, all those things that I talked about, the ability to reach people when they're bored and the, and the downtime. To understand what those people want implies the sort of like data collection and, and stuff that Facebook is, is getting grief about currently. And also people are more likely, I think, to be critical of just a leisure activity in general. Like, yeah, like it, it's less clear what societal value Facebook contributes that gives them a defense against their actions.

• 1:05:30Speaker 00

  Whereas Google is like, we, you don't use Google, everyone uses Google, it buys a very valuable. Again, I, I think that's a little unfair to Facebook. I think like, it's like when you're raising kids, like it's very easy to say like, oh, my kids should be studying more and taking more classes and doing stuff. But kids need to play, right? They need downtime. You know, I think there's an aspect of, it's okay to be a leisure focused company. It's okay that to be something that people do when they're bored and, um, but it's also a much easier way to attack. And does Facebook have addictive qualities? Are there issues about it? I don't know. I, I'm glad they're opening up to more research. Uh, I think that there is a personal responsibility aspect that goes into this. Uh, but it's a much bigger sort of danger zone for Facebook where they get branded as being like the new smoking, the, or something like that.

• 1:06:15Speaker 00

  And, and given that these companies gain their power through owning the customer relationship, the greatest danger is always a turn in customer sentiment.

• 1:06:25Shane Parrish?

  I mean, it is becoming harder, but is it insurmountable now that the person in their garage could compete with Google? Like, is that data advantage cumulative for Google and Facebook and Amazon in the sense that like, the longer it goes on, the harder it will be to effectively compete with them?

• 1:06:45Speaker 00

  Well, it was impossible for someone in their garage to compete with Microsoft. And I think that's what people don't appreciate about these sort of dominant players in these sort of epochs is they are tied to the paradigm of the moment. And their upheaval and downfall will come not from someone being in a garage alone. It will come from someone being in a garage who latches on to the next paradigm shift that makes it impossible for the powers that be to compete. I mean, the issue with Microsoft was, you know, mobile, well, two issues. One, the internet sort of, you know, it changed the layer of lock-in, if that makes sense, where it didn't matter if you were on the Windows API or not, because everything was

• 1:07:30Speaker 00

  within a browser window. It actually mattered what was the first site people went to the browser window, which was Google. And sort of the layer of the chokehold kind of moved up. In the case of mobile, the Microsoft didn't have the right business model. The business model was either you own the device and sell the device like Apple did, or you give the software for free, building this massive sort of network effect. And then you have another reason monetizing it, which Google and Android did. And Microsoft was stuck with a licensing business model that just didn't make sense, that didn't work. And they also had the wrong mindset. They couldn't, all of Microsoft's mobile phones, before the iPhone came along, all presumed the presence of a PC. They all assumed the PC would be central to people's lives, and the phone was an adjunct to that. And it turned out, actually, no, the phone is your standard of your life, and the PC is an adjunct to that.

• 1:08:15Speaker 00

  And Microsoft could never get over that culturally and from a mindset perspective. And so, and that's what took Microsoft down, was not someone in a garage, it was that the world changed. And I think this is

• 1:08:26Shane Parrish?

  And they didn't recognize it.

• 1:08:28Speaker 00

  What no one would have recognized it. I think that Microsoft gets a lot of unfair grief for a fate that would have befallen any manager and any company in the same position because it was a matter of culture and it was a matter of broad changes in the competitive space. It had nothing to do with Microsoft itself. Microsoft didn't miss mobile. Microsoft started building mobile phones in the late 90s. Like, like, they didn't miss it. They just were fundamentally inequipped to compete in it. And that's what happens. That's how disruption happens. And the stories of companies moving seamlessly from one paradigm to another are basically nonexistent because all the things that make you strong and competitive in one paradigm make you fundamentally ill-equipped to be in the next one. It's what I said at the beginning, strengths are weaknesses.

• 1:09:12Shane Parrish?

  You're fragile.

• 1:09:13Speaker 00

  What makes you strong in one... Yeah, I mean, so I, if I'm competing right now with systematic analysis of technology and society, if it turned out tomorrow that the only newsletters that matter, the ones that got into the nitty-gritty details and whatever, I'd be screwed. Like, I'm not going to fundamentally change who I am. And, and, you know, that's a very, obviously, isolated, narrow example, but it absolutely applies broadly to, to companies as big as Microsoft.

• 1:09:37Shane Parrish?

  Switching gears just a little bit. I mean, there's, there's a massive kind of consolidation going on in old media. So like cable networks, cable providers, broadcasters, telecoms, even cellphone providers to that extent. I mean, I feel like a new merger is basically being announced, you know, if not daily, kind of weekly. Why do you think this is happening now? What's the driving force? And how does this find an equilibrium?

• 1:10:03Speaker 00

  Well, it's for the reason that story that I told before about watching the big sports game and then going to the store and buying deodorant. The, there was a way of organizing the world that held true for 60 some years after the kind of the post-World War II order. And that order is ending. And when, when orders and eras come to an end, the inevitable outcome is sort of consolidation and coming together. And there's an aspect to where technology enables this, where there's almost like two eras of technology. Like, the first era of technology... Made existing companies and processes better and more efficient. So it was the big companies that would buy big, you know, accounting systems and backend, you know,

• 1:10:47Speaker 00

  mainframes, this around sort of stuff, and it made what they did better. The internet fundamentally changed the assumptions undergirding their business. And and to some extent, it made it more possible to run large companies efficiently. So, you know, doing a merger became a more viable process. But the broader trend is that the the world in which these companies grew up in, in which they're they're built to operate in, that world is shrinking and and the the obvious way to deal with that is to merge and to see if we can figure it out together. Because because we we don't have time to compete with each other because we have to deal with sort of fundamental secular impacts on our on our companies and businesses.

• 1:11:28Shane Parrish?

  Talk to me, you mentioned earlier about bundling and unbundling. Talk to me a little bit about what's going on there, what you see and what you you feel is happening and where we're going to land.

• 1:11:38Speaker 00

  Well, what happens with these paradigm shifts is that the point of integration changes, you know, sort of changes in the value chain where where it used to be, uh, you know, you integrate at a particular point, and that's where and everyone around the point of integration sort of modulates and fits into that framework. So the the there used to be a point of integration around sort of putting all the TV channels together. And then on one side, you would have customers that would that would sign up. This idea would have show creators that would make a show and sell it to the highest bidder. And then they'd sell it elsewhere, international rights and rerun rights, all these sort of things. And you had sort of very modular pieces in this integration in the middle. And then what happened was like Netflix came along and they, what was the key thing that they digitized?

• 1:12:22Speaker 00

  If if Airbnb sort of digitized trust, uh, Netflix digitized time, like the linear sort of TV schedule that was the sort of like the the key constraint on TV was now completely gone. And there's a there's a great example here, which is Netflix is it's well known their initial foray to streaming was made possible by a deal with Starz uh for 11,000 movies. And the day that Netflix launched streaming, what was the effective catalog size for Starz?

• 1:12:53Speaker 00

  It was one, it was whatever movie they were showing on their channel at that time.

• 1:12:57Shane Parrish?

  Right.

• 1:12:57Speaker 00

  Uh, whereas for Netflix, the moment they launched, the effective Cadillac size was 11,000 because you could choose any one of the movies to watch. And, and what this did was, and, and then Netflix combined that with, that created this fantastic user experience that let them gain customers. They gain customers, they gain more economic power over suppliers, they can start signing up new suppliers. Eventually they can get to the point where they can start creating their own shows. And what happened is you, you, you, the entire value chain has been broken up and reformed around this new integration that Netflix has between their service a, and owning the customer relationship. And, and now it's broken down into individual shows, selling, selling to Netflix. It's no longer like the studio system and all those sorts of things. All that's been, is breaking up into pieces.

• 1:13:40Speaker 00

  And so there's a, there's a famous quote, the bundling on bunny quote from Jim Barxell, the, the, uh, co-founder of Netscape, which is, uh, there are two ways to make money in business. One is to bundle and the other is to unbundle. And, and what this gets at is if you find a point of differentiation, a way to integrate in a value chain, you can build a new value chain, such as the rest, you, you build a new bundle and everyone around you unbundles and aligns themselves to you. It's like when you have a bunch of magnets and you move, you know, you, you, you build a connection where they all kind of scurry around and line up, right? That, that's what happens in business is, is, and, and it happens on paradigm shifts. It happens with the internet where, where new areas become possible, new points of integration. And then everything else in the value chain reorganizes itself around that.

• 1:14:25Shane Parrish?

  And where do you think that, that lands? Is it just the seesaw between bundling and unbundling indefinitely or is it?

• 1:14:32Speaker 00

  No, no, I, I, no, I think we're in the middle of a huge transition and, and probably will have, uh, more stability going forward. I think, you know, the long run, it, for, for TV, for example, the long run is likely that there's, uh, the traditional bundle becomes basically all about sports because sports is better live. Sports is, is, is advertising driven. And so the, the business model on that side is going to be different. And it's going to be very expensive. You're going to pay like a lot of money to get not that many channels that are mostly all sports. And it's going to become an accidental sports spend over people that only want sports, uh, and it's kind of. Back into that, you have Netflix and you're probably gonna have like Disney Fox, for example, and maybe one or two other services like, like that are like Amazon Prime. But the goal there is Amazon. It's not to be entertainment in itself.

• 1:15:13Speaker 00

  And what's gonna happen is people are gonna end up paying about the same amount of money every month they do for content today. They're just gonna be paying different people. And, and I, and I think that that's gonna be the case. This idea that there's gonna be this, this, you know, you're gonna suddenly be paying $15 a month for all the entertainment you want is a fantasy. That's not gonna happen. What's gonna happen is you're gonna be paying different people than you paid before. Yeah, I'll see that in lots of industries. Like, there'll be new giants that emerge that in the new area that, that, that, that are created with like, when I started Chitkery, I started it with the business model in place, which gave me lots of advantages relative to, to other folks, right? You're gonna see the same thing at a much larger scale.

• 1:15:55Speaker 00

  Companies that are started with internet assumptions, that are started with a view of how the world works today. It was started with the assumption of zero distribution cost for information and the ability to sort of scale are, are going to be the new giants. And we're just kind of in, I think, in the middle of this, what's gonna be a, you know, multi-year, probably multi-decade sort of shift.

• 1:16:15Shane Parrish?

  Talk to me about how VC is shaping kind of this space. I mean, we, we have things that have never really happened before. We have private companies that are allegedly valued at like $60 billion. We have companies staying private longer. We have companies willing to sustain losses longer in order to try and compete with these companies. How is that all playing out?

• 1:16:39Speaker 00

  Well, I would say there's, there's two points. One, I think VC is inextricably tied to technology. And the reason is that the nature of technology is massive upfront investment followed by basically zero marginal costs and, and, and huge amounts of scale. If you write a piece of software, it, it takes a lot of time, a lot of money. But once that software is written, it can be reproduced infinitely. And, you know, the same thing with like chips, which is where VC really started was, it was in chip production. Like chips are made out of sand, right? For all intents and purposes. They're, the marginal cost is nothing, astronomical amounts of fixed costs upfront. And so VC is, is, VC is the financial equivalent of software. It is, is the, the mechanism by which to put a lot of money in upfront,

• 1:17:23Speaker 00

  such that you can earn, you know, uncapped returns on, on the backend. So, so it's always been. A key component of technology, you can't pull them apart. That said, VC has been fundamentally shifted. I think like, like AWS has been a huge factor here where it, it used to be you needed funding to build something, to get something out the ground. So you, you, you would have to get funding with a PowerPoint just to even do, do anything. Whereas now, because you had to buy servers, like even if you wanted to do it in your spare time, you still had to get a server, right? Now you can walk up to Amazon and basically you have as many servers as you could possibly want on a pay as you go basis, such that you can build something, get out the ground, prove a concept. And now you walk into a pitch meeting and you're actually demonstrating a working, a working app

• 1:18:07Speaker 00

  as opposed to a, a PowerPoint. And so that you've seen the entire ecosystem of, of, of funding shift where what used to be a series A, today is a pre-seed and then there's a seed and then there's a series A, which is basically the old series C. So part of that is sort of the structural shift in VCs. Everything's sort of shifted up the chain. As far as the huge amounts of, of private capital being available at the highest ends, I think that's sort of, that's almost a separate category than VC in many respects. It, it's, it's more a matter of if it's a new investment class, I would say completely. Like, like it, it's called venture capital funding, like once you're funding an Uber at like billions of dollars. But to me, it's a completely different, it is called like growth investing, basically.

• 1:18:50Speaker 00

  And, and in this case, you're not, because VC, you're hoping for the 10x return, right? You're, you're, you're doing a bunch of bets and you want a couple to maybe hit in one, like one grand slam. And that will make the return for your entire fund. Growth investing is not like that. No one is investing at Uber at a $75 billion valuation, hoping to get a 10x return. It is much more akin to, I think, traditional sort of equity investing. But obviously with a higher risk profile, a, a chance, which implies a chance for a higher return. But the fundamental mechanics and thinking and modeling that goes into those investments is completely different than, than regular venture capital investing.

• 1:19:28Shane Parrish?

  You've said it's changed a lot over the years and that's because Amazon has equal, and Shopify to some extent, I would imagine, have given people the tools that were commonly unavailable. What, what do you see as kind of like the next stage of this transition?

• 1:19:44Speaker 00

  Well, I, I would say, I mean, essentially you mentioned Shopify. I don't think Shopify generally has much to do with a, a VC startup, for example.

• 1:19:53Speaker 00

  What I think is Startups in sort of my world are generally like VC funded, right? It's and they are, the goal is to build a at least a hundred million dollar company, ideally like a billion dollar company and get a huge, huge amount of return. I actually think though, there is a massive opportunity and for a completely new type of businesses, you know, derogatorily referred to as lifestyle businesses, but businesses that are uniquely enabled by the internet and the ability to access the entire world as your market. And, you know, you and I are examples of this. I can sit in Taiwan and I have customers in, in literally hundreds of countries around the world because, because of the internet. But the fact I can build that business is reliant on, for example, Stripe, like Stripe

• 1:20:38Speaker 00

  making it trivial for me to accept payments or WordPress, like the fact that, you know, I can have this platform and all these sorts of pieces. And, you know, and Shopify is, is a classic example of that sort of company. And these are the companies I'm the most excited about and the most passionate about because I think we need to dramatically reduce the barriers for people to, to build new kinds of business uniquely enabled by the internet. And I think those are where the jobs of the future are going to come from. They're not going to come from a Facebook or, or, I mean, I guess a lot are coming from Amazon frankly, but, but they're, and people tell it, oh, there's the long run trend in lower business formation going in the US. And, and I'm not surprised by that, in part because a lot of the consolidation and, and

• 1:21:22Speaker 00

  the reduction in friction that the internet allowed, bigger companies be bigger and reach out in a small towns more and more. I suspect that rate that of decline would be even faster if it weren't for these new types of businesses. And my hope and belief in the long run is that, kind of like music, like the music industry, their, their revenue declined for many years and was like, oh, the music industry is screwed. It turns out the music industry is actually in fantastic shape and their revenue has been increasing a lot and they're actually going to have, they're on pace to have like their best year ever in like the next couple of years, like even more than like the CD era. Why? Because streaming came along and just a fundamentally

• 1:22:01Speaker 00

  More cohesive model. Yeah, and it took time and you had to weather the decline of the old model. But the new model came through and and I believe and and and a lot of the sort of policy prescriptions that I have to do that I do are all about enabling this new model for the world where where people are. There are platforms, people are uniquely enabled to build new kinds of businesses that were not possible before the internet. It's kind of by definition, right? If the internet is screwing up all these other businesses, then the the businesses that take to place almost by definition have to be predicated on the internet because like the strength has to be the weakness in that regard. And so I don't write about partisan politics much, but things like I do endorse are things like

• 1:22:45Speaker 00

  universal healthcare, for example. I'm well aware of all the arguments against it and the challenges in the US in particular. But people need to not worry about their family getting sick and to invent these sort of new jobs of the future, for example. And so that's one of the things that I'm extremely passionate about and is a core belief and and for me about how we deal with this sort of ongoing disruption.

• 1:23:11Shane Parrish?

  How do you see like tech influencing payments? So like Stripe came along, but I mean Visa and Mastercard and where that's going?

• 1:23:21Speaker 00

  I mean, I think the people, the thing that people forget about Visa and Mastercard is they're incredibly convenient. I mean, the reason why they credit cards are everywhere is because they solved a real pain problem. And they and anything that that wants to replace them has to not just be a little bit better, it has to be massively better and massively better in multiple directions. And again, the, you know, I am well aware of of how expensive credit cards are. It's my largest expense by a lot. But at the same time, it's not going to ever not support credit cards because they cost a lot. Like the payoff inconvenience for customers to be able to sign up from anywhere over the world is is well worth it.

• 1:24:03Speaker 00

  And and so, you know, I think we'll probably have the credit card with us for a lot longer than some of the proponents of alternative payment methods might think.

• 1:24:13Shane Parrish?

  Well, it seems like everything that's new, even like Apple Pay, I mean, it's run on the back end of existing kind of credit card companies or platforms.

• 1:24:21Speaker 00

  Yeah, I mean, and you could sketch out a scenario where in the long run, if enough people use Apple Pay, then Apple Pay could, you know, Apple could do something to switch out the back end. But frankly, why would Apple want to do that? I mean, what Apple does, Apple wants to control the user experience and then get, uh, get other people to do the very expensive sort of like infrastructure build out. Like, think about the iPhone, right? They leverage the iPhone to sort of control customers and made it so that customers would switch carriers to get the iPhone, which gave them power over the carriers. And the carriers had to spend billions and billions of dollars to build out new infrastructure to support all the data these iPhone users were using. And Apple didn't have to pay a dime. And, and, and so that's what Apple wants to do in industry, the messy, high investment, relatively low turn of capital stuff. They would rather gain leverage over

• 1:25:06Speaker 00

  other people and force them to do it, to get access to Apple's customers.

• 1:25:10Shane Parrish?

  I know we're, we're kind of butting up on time here, so I've got a couple of questions left. But do you think that ultimately, like, social media, the ecosphere is healthy for people? I mean, there seems to be recognition now that, well, Facebook and Instagram and all of these services give us leisure time. Do you think they're good for society?

• 1:25:28Speaker 00

  I would say probably not, but it doesn't really matter. And, and, and what I mean is, you know, there, there is something I read a long time, I can't remember where, but this idea where it used to be, I think the issue goes beyond social media. And what I mean is, it used to be that the world that mattered to us day to day was our local world, and occasionally the outside world would intrude in, like, whereas we've shifted to a world where we're all obsessed with the outside world and occasionally the inside world, the close by world breaks in. And I, I think that's, that's challenging, I think, for humans probably generally. I mean, it's not healthy, I think, to be obsessed with the, the tosses in terms of what happens in Washington DC and what that affect your sort of emotional mood on an ongoing basis. And I think social media exacerbates that

• 1:26:12Speaker 00

  and exaggerates that greatly. And, and it, and it, I think, perpetuates the sort of filter bubbles and the bubbles in general where you think lots of people agree with you. Whereas if you're in your small town, To find people that agree with you, you you're geographically constrained with people that don't agree with you or or view the world differently. It whereas you can surround yourself through, I think, the same thing as you online. And I think all those are probably problematic. And the reason why I think it doesn't matter, though, is uh the genie is not going back in the bottle. And I think this applies to lots of things. It applies to social media, applies to the economy, applies to advertising, applies to privacy. The temptation is going to be strong to fight battles that have already been decided. When we would be much better off pushing forward and figuring out what we're going to do going forward.

• 1:26:56Speaker 00

  How are we going to build the sort of like structures going forward that that are healthy, that make sense? How are we going to train people to be able to handle 24/7 news, to handle social media? How are we going to create the conditions for the companies of the future going forward? Like to to bemoan that the world, the post-World War II order is falling apart is is completely counterproductive. And and is a opportunity cost to actually figure out what's next.

• 1:27:22Shane Parrish?

  To an extension of that, to some part, do you think government plays a role in making Facebook or Google provide data to everybody? So that everybody can access it?

• 1:27:33Speaker 00

  Yeah, and this is this is the uh this is the real sort of paradox of what's going on right now. Is Facebook's response, and they are being cheered on as they do it, for all its purposes, is to lock down their data.

• 1:27:44Shane Parrish?

  Yeah.

• 1:27:45Speaker 00

  Which basically entrenches them and and and those laws of regulation and throughout the GDPR. The GDPR is is is it going to be very costly for Google and Facebook? Absolutely. But it's going to be but.

• 1:27:59Shane Parrish?

  What's a GDPR for people who don't know?

• 1:28:01Speaker 00

  Uh, the the European General Data Privacy Regulation. Uh, and and it's it poses all these things around data and data retention, you have to get permission from customers. And all these sorts of things, and it was like, oh, Facebook, who are in big trouble. Well, yeah, they are. But if you realize that there is still going to be digital advertising, the alternatives to Google and Facebook are going to be hurt way more. Like, is is every site with advertising on it going to get permission from users for each of the individual ad networks it runs on the site? Like, like, if you think about the barriers as opposed To a Google or Facebook, which has so much internal data like Facebook has lots of data. You already told Facebook if they were cut off from all third party data, they would still be fine. If Google is cut off from all third party data, they're they're still fine.

• 1:28:45Speaker 00

  If if a publication is cut off from all third party data, are they going to be fine? No, they're going to be they're going to be in in much more trouble. And and I think you're this is going to be a challenge such a challenge with government action going forward is the most obvious solutions are are going to lock in the biggest players, going to lock in the incumbents. And and something that is important to me is continuing to raise a voice and like remember, remember the future little guy that whose business hasn't started yet. And let's make sure we maintain the conditions for for him or her to get off the ground. Because we we need new jobs, we need jobs that don't exist. We need new industries that are uniquely nailed by the internet.

• 1:29:28Speaker 00

  It's going to be awfully easy to shut that off before it even gets started.

• 1:29:31Shane Parrish?

  That begs the question, like, what regulations would you look at enacting if you were in government to give the little guy kind of a chance, but more so to not further embed these or entrench these larger tech companies?

• 1:29:45Speaker 00

  Well, I mean, it's it's very there's there's two ways to argue this. So so one is that these companies need to be broken up or they need to be like like maybe like Google or Facebook is separated. So there's more competition in the end market would be one one argument. Another argument, though, on the flip side, is maybe they actually should be heavily regulated and such that we we have sort of stable platforms and foundations on which the future can be built. And you think about something like like AT&T, right? Eighteen like the it was phone service was costly and didn't evolve very much.

• 1:30:25Speaker 00

  But the it was a stable sort of base that that that other stuff could could be built on. And I'm not I'm not totally sure to be honest, it's something I've been wrestling about about a lot about what should this sort of. Regulatory response be to these platforms because there's an aspect of it. The the the implication of aggregation theory is that to be large and to be dominant is the is the natural state of affairs because of these feedback loops like the the the end state for an aggregator is to be to win it all to take it all. And if I think that the future is I use it on the exponent podcast of this jungle analogy where you're going to have the the huge trees that tower of everything.

• 1:31:07Speaker 00

  And then a huge amount of like undergrowth and like just massive amount of like life and and and all kinds of vegetation on the floor and kind of nothing in the middle. If that's sort of the future where you have these massive platforms and you have that stuff in the middle, then maybe it maybe maybe like seeking out stability and a fair playing field on top of the platforms is more important than ensuring platform competition, if that makes sense. Uh, and and there's something I I I'm not sure that I've fully articulated that specifically on Stratech yet, but it's certainly something that I'm trying to come to term with in my own head. And I like, there's just going to be different. This barbell effect, there's going to be big, there's going to be small.

• 1:31:50Speaker 00

  And and how do we deal with the one while maintaining room for the other, I think, is is going to be sort of the critical policy question going forward.

• 1:31:58Shane Parrish?

  I think that's a great segue into kind of my last question, which is you've been running Stratech, I think, five years now?

• 1:32:05Speaker 00

  I started Stratech five years ago, and then it became a business four years ago.

• 1:32:09Shane Parrish?

  Right, so tell me what's changed in those years about what you thought about going into running Stratech, because you had this business model in mind and kind of what you've learned and honed or changed your mind on over the past five years. Like, what have you learned from running this?

• 1:32:23Speaker 00

  Like about technology or about or about Stratech?

• 1:32:25Shane Parrish?

  No, but the Stratech, the business.

• 1:32:28Speaker 00

  Uh, I mean, I first and foremost, I would say one is the speed with which you can grow and and where it might could spread, uh, you know, was was kind of mind blowing. Like I said, I like it's five years now. My goal when I started Stratech was that in five years, it could become my job. Uh, it actually became my job in a year, and I am now five years in and far more successful than I would have ever imagined or or made possible. And frankly, and and a lot of that success was really seeded in the first few months, you know, going from having, you know, a few readers to having thousands of readers in a remarkably short amount of time. And I think that, you know, the social media. Is viewed as such a bad thing for publications, but that's because they don't have the right business model.

• 1:33:12Speaker 00

  For me, social media is absolutely incredible. I it's the it's the most amazing channel that that could ever be invented and I get to use it for free. Uh, so I think that's probably the biggest surprise. The second one is probably just, it's a big market out there. I mean, there's, there's so many people and, you know, I constantly on Twitter will encounter people who they don't follow me and like, you like, I think this person would actually really enjoy, not saying that, you know, I'm the, and I'll be all Twitter followers. This person clearly doesn't know who I am because I see their tweets, what they're writing about. And they would almost certainly be interested in in stuff that I that I read about. Or they follow people that that would make sense, they would want to follow me. And and that's, that's, that's actually kind of a great feeling. It's, I I don't not resentful, they don't know who I am. It reminds me that there's still sort of upside.

• 1:33:56Speaker 00

  There's like, there's still room to grow here. And I think this is a mistake that people make, people like, oh, yeah, how many subscription sites can there be? Like, not everyone can have like 50 subscriptions. And no, that's not the outcome. The the outcome is breadth. There's going to be so many niches and there's so many people out there that that there's going to be enough for everyone, there's enough to go around. We we kind of have this off offline before we started recording that. Yeah, yeah, we both have subscription models, but like, are we competitors? I mean, no, they're like, we're not, it's not like there's a thousand people who will pay for content in the world and we have to fight over those thousand people. There, there are hundreds of thousands, probably almost certainly millions, tens of millions, hundreds of millions that will. And it's more a matter of, i- i- it's a great problem to have that to know that I have customers out there.

• 1:34:39Speaker 00

  And the issue is not that I need to convince them to pay, it's that they just don't know who I am yet. And and that's, that's, that's a pretty sort of

• 1:34:46Shane Parrish?

  Yeah.

• 1:34:46Speaker 00

  Great place to be.

• 1:34:48Shane Parrish?

  Yeah, I like that a lot. And one of the other things that we touched on earlier, I mean, before we started recording was um, we didn't explicitly call it this, but there's the value you create and the value you capture. And there needs to be a means for people to capture a percentage of the value you create. And if you over capture, you kind of go out of business. And if you under capture, you go out of business. And there has to be a mechanism sort of in the middle where you can earn a living and still provide high quality, meaningful content to people.

• 1:35:16Speaker 00

  Yeah, no, absolutely. And I mean, the, you know, the internet, like, I don't know, like, I'm cognizant of the fact that I am inherently biased because my personal life and business have benefited so greatly from the internet. But I am also pushed back strongly against the, it was kind of a running joke, like, that's fine for Ben, or that's great for Ben, which I think I stole from Merlin Ma, like, that's fine for Merlin. And, and this idea that, oh, that my success rests on, on things that are unique to me. Now, do I bring things to the table that are valuable? I mean, obviously, I'm not saying anyone can write an internet publication, or anyone can start a business, you have to deliver something of value that is differentiated. But I strongly

• 1:36:01Speaker 00

  reject that I am the only person in the world that can deliver differentiated content. I think lots of people can about lots of areas that I know nothing about. And, and I, and there are lots of examples of that more and more, more than people know and appreciate. And, and, you know, it's like the example of, like, saying Microsoft failed because of the actions of Steve Ballmer. It's such a presumptuous, and, and it's human nature to ascribe things to people, but it's wrong. Like, what matters far more is the context and environment around Microsoft. And I think the same thing with me. Am I successful because of my hard work? I am. And, and, and that's true. But it's, I reject the idea that I am solely responsible. I could, I

• 1:36:45Speaker 00

  have, I could write the exact same things, the exact same sort of person I was, and I've come along 10 years earlier, or five years earlier, and, and would not be successful.

• 1:36:54Shane Parrish?

  Had a completely different outcome than you have now.

• 1:36:56Speaker 00

  Yeah, absolutely. I'd be writing for, like, you know, some, like, magazine or whatever, making, you know, probably scratching out a living. I was the right place, right time. And frankly, if I came along 10 years later, I probably wouldn't be successful either because someone would be in my space, someone would be in my niche. And, and I'm very cognizant, I just was in the right place at the right time. And there's nothing wrong, it can be both, it can be both. And I think to the extent I succeed in writing about companies, in writing about strategy, it's acknowledging and describing all those contextual factors beyond the sort of, like, great man theory of history, that, you know, Steve Jobs was such a great person, that's why Apple succeeded. Well, what are the other things that, that sort of go into that? It's easy to write the one, it's more, it's more difficult to write the other, but, but,

• 1:37:42Speaker 00

  You know, it's very important.

• 1:37:43Shane Parrish?

  Yeah, I totally agree. One more question. Sorry, I lied about last question because I could talk to you for hours. But I'd get a ton of emails afterwards if I didn't ask you how you organize and retain the knowledge that you're consuming. Like, what is your backend sort of organization system for what you're reading and how you're thinking about things and how that evolves? Like, how do you create your own personal Google or what's your backend system for that? Or is it all literally in your head? In which case, the rest of us have no hope.

• 1:38:15Speaker 00

  So, all that said, all that said, I have three sort of like unique skills that definitely benefit what I do. One is I read extremely fast. Two is I write extremely fast. And three is I have a very good memory. Like, I just like, so I will remember stuff and like Google's my best friend. Or I use like, one of the reasons I want to upgrade its search on Shishakery, like I just launched a new version of the site with a new search experience. It's because I use search more than anyone. And like, I know I've written about this. I need to find it. So, that said, I've definitely, I'm definitely getting old, man. Like, I can feel, I just don't, I could just, I could retain stuff like nobody's business when I was younger. And it's getting harder. So, so I am trying to be better about that.

• 1:38:55Speaker 00

  What I do do is I keep a, an outline. I use workflow and where I'm constantly filling it with links of stories of interest and notes like that. And, and it does have a search function and I don't always rely on it exclusively. But I'm, I'm always trying to capture stuff as I go along that I think is, that I think is of interest. And I'll put it in, I'll just put a few notes about what the article's about and then a link. And then I rely on search. Like, there's, I remember at Microsoft, the, the email team did a study about the different kinds of like people, the way people use email. Like, the filer versus the searcher or something like that, or the holder or whatever. I am definitely in the like, if there was no search, I would be screwed.

• 1:39:39Speaker 00

  So, I'm in the like, I vaguely, I vaguely recall that I saw something about this one time. And let me, let me exercise my Google foo or my, my, my, my email inbox search capabilities to find what I, what I was searching for.

• 1:39:53Shane Parrish?

  I agree with you. I'm very search oriented as well. Ben, this has been phenomenal. I want to thank you so much for such an amazing conversation. We might have to do this again.

• 1:40:03Speaker 00

  Sounds good. I'm happy to be here and thanks again for the multiple delays in getting it out, but we've done it. So there you go.

• 1:40:10Shane Parrish?

  That's awesome.

• 1:40:15Shane Parrish?

  Hey guys, this is Shane again. Just a few more things before we wrap up. You can find show notes at farnamstreetblog.com/podcast. That's F A R N A M S T R E E T B L O G dot com slash podcast. You can also find information there on how to get a transcript. And if you'd like to receive a weekly email from me filled with all sorts of brain food, go to farnamstreetblog.com/newsletter. This is all the good stuff I've found on the web that week that I've read and shared with close friends, books I'm reading, and so much more. Thank you for listening.